In a submission to a Parliamentary Committee, Australia’s Immigration Department provided details of the amount of funds received under the Significant Investor Visa Scheme. 90% of the investors under this Scheme are Chinese citizens and close to $150 million has been received through this route. Such investors, who are prohibited from investing directly in real estate, have pumped in around $111.5 million to private property developers while property-centric funds received an additional $28 million.
However, the Department admitted its inability to identify the end destination of such funds. The true extent of foreign investment in property in Australia is not known even to its Immigration Department. According to the department, its scope of oversight is restricted to collecting limited data about qualifying businesses and managed funds that can receive investments from significant investors and ensuring compliance with the investment norms. It admitted that assessing whether the managed funds invest the funds so received from significant investors into property was difficult to track.
Australia is attracted foreign investments to the tune of $1.7 billion and has granted 343 residence visas under the Scheme. 85% of the visas granted have been issued to Chinese investors. As on July 31, 2014, another 602 applicants have sought the residency visas and have committed to invest $3.05 billion under the Scheme. The Significant Investor Scheme requires investment of minimum $5 million in approved assets.
The department’s views were sought in course of a Senate inquiry into the allegation that the Visa Scheme was being misused and that Chinese investments were being funneled into the residential real estate sector. The Scheme requires the $5 million to be invested in government bonds, managed funds, or private companies.
The inquiry was necessitated by the surge in foreign investments in the real estate sector in Australia. According to data released by Treasury, there was a 93% jump in foreign investments in this sector in the first three quarters of 2013-14.
In its submission to the same inquiry, the Reserve Bank of Australia indicated presence of deficiencies in data related to foreign purchase of real estate that is being collected by the Foreign Investment Review Board. The RBA highlighted that instances of subsequent sale of properties to Australian citizens or Permanent Residents were not being tracked. Further, absence of comprehensive data regarding the total dwelling purchases made it difficult to track the share of Significant Investors in the total demand for housing in the nation.
That Foreign Investment Review Board data merely represented approvals and not the actual purchases further complicated the analysis process. Despite these complications, the Treasury stated that the approvals data does show a significant rise in foreign investment in the real estate sector as compared to the previous year.
However, the Immigration Department has stated that government bonds continue to be the preferred investment option for significant investors. The Department submitted that close to 50% of all investments made by significant visa holders were made in government bonds, which have no relation to the real estate sector in Australia.
Source: www.afr.com