The proposed changes to Australian Significant Investor Visa program, according to property management firms and immigration experts, may cause the entire program to shut down. The proposed changes, set to come into effect from 1st July 2015, restrict participation of investment immigrants in the residential property sector, prohibit direct purchase of government bonds, and require SIV investors to allocate up to 50% of their funds in venture capital and microcap companies.
Pointing out that the new investment classes are high-risk investments, immigration experts have warned that there may be a drastic decrease in demand from wealthy investors from all over the world for Australian Significant Investor Visa program.
Wealth management experts have pointed out that the venture capital and microcap sector in Australia are significantly underdeveloped as compared to other investment options. According to 2014 data released by the Australian Private Equity and Venture Capital Association Limited, the country’s venture capital sector has attracted just around $150 million per year for the past five years, with active participation of just three or four managers.
The data, according to experts, clearly suggests that wealthy investors will find it difficult to identify profitable investment opportunities in this sector. Further, investors will require expert advice comply with the allocation requirements proposed under the new guidelines.
After implementation of the new rules, immigration industry watchers anticipate a shift to demand for Business Visas or Investor Stream visas as opposed to the now popular Significant Investor Visa. Immigration firms also expect more investors to switch to less complicated and more affordable options like the Canadian pilot program or the USA’s EB-5 visa program.
According to immigration lawyers and property management firms, reducing the minimum investment requirement in venture capital and microcap sector from proposed 50% to 10-20% can salvage the program. They recommend elimination of the mandatory small cap investment requirement.
Allowing investment immigrants to balance their venture capital and microcap investments with assets of their preferences would, according to experts, ensure unabated flow of foreign investment without negative impact on the popularity of the Significant Investor program.
Another proposed change expected to affect sentiments is the 10% limit on investment in residential properties. Experts say that while the SIV program should control direct investment in existing residential properties, investment in new residential projects should not be prohibited. Instead, they recommend focus on attracting foreign investment to residential real estate projects as such a move will encourage investment in the sector, contribute to faster job creation, help increase supply of housing in the market, and generate higher revenue through stamp duty payments.
It remains to be seen whether the changes to be introduced from July 1, 2015 will, as warned by experts, have a negative impact on the flow of foreign investment and the popularity of the SIV program in Australia.
Source: Property Observer