(April 12, 2010)

OVERSEAS home buyers may be crowding locals out of the market.

At backyard barbecues during the weekend, it's a fair bet conversations turned to the political panic-button topics of interest rates, immigration and property prices. Disconcertingly for the Federal Government in an election year, the community is starting to notice a nexus, and it borders on xenophobia.

Anecdotes abound about cashed-up Chinese investors "land banking" by collecting houses, only to leave them vacant and desperate first home buyers repeatedly being beaten at auctions by foreign bidders.

Relaxed rules

This foreign investment fuse was lit a few days before Christmas in 2008, when Australia was on the edge of recession and economists were predicting a property crash. Without fanfare and certainly without community consultation the Rudd Government relaxed Australia's stringent restrictions on foreign purchases of residential real estate.

Barely a year later, property prices have surged so strongly in the convalescing economy that the Reserve Bank is having to raise interest rates to dampen buyers' desire.

Predictably, home hunters frustrated by spiralling prices and creeping interest rates are beginning to blame "foreigners" for marking up the property market, especially the predominantly east Asian and Indian students on temporary visas who are now allowed to spend as much as they can afford on existing houses.

Legal loophole

Caraco defines the FIRB changes as "definitely a legal loophole" for foreigners. "When does it close?" he asks. "I suppose when there's upheaval about it. I think after you leave the country you should have to sell it; that would be more equitable. I can't go to another country and get a temporary visa and buy real estate."

A FIRB official told The Australian that temporary residents are still "expected" to sell a property when they return overseas, even though there is no longer any legislative requirement, and the FIRB can no longer identify who has bought a property. Ray White's Victorian general manager, Marcus Williams, says it would be "naive" to think the FIRB changes are not having an impact.

"In Melbourne, from the inner city out towards the west, you're seeing a larger number of foreign people at our auctions," he says."Now temporary residents don't need to seek FIRB approval, it makes life easier. Supposedly they need to live in the properties and not rent them out, but I don't know what sort of checks are in place to ensure that doesn't occur.

Yet the sparse data that is available undercuts the anecdotal evidence. International property giant DTZ's project marketing director in Australia, Paul Barratt, reckons foreign investment in Queensland real estate has slumped more than 30 per cent in the past two years.

Analysing the raw data provided by Queensland's Department of Environment and Resource Management, he found foreign investment in the state's property sector has crashed from $558m in 2007 to $355m in 2009. Foreign sales made up just 0.75 per cent of Queensland's property transactions last year, he found. Hot spots are the Gold Coast -- with $174m in sales -- inner-Brisbane, with $84m, $27m of foreign sales in Cairns and $37m on the Sunshine Coast.

(Source from: the Australian)