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"The End of Foreigners Buying Australian Property"

Discussion in 'Property Finance' started by montoya, 9th May, 2016.

  1. montoya

    montoya Well-Known Member

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    Going, going, gone! The end of foreigners buying Australian property

    Obviously will not affect those using cash to invest, but interesting for the market that is the Sydney/Melbourne OTP units yet to be completed, unless there's other loopholes the article doesn't mention.

    I'm secretly hoping it does lead to a drop in price for this style of property as I'd be quite happy purchasing one in 2017/2018 for a PPOR whilst continuing to invest elsewhere.
     
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  2. teg499

    teg499 Well-Known Member

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    Same here. I hope OTP units take a dive so I can bag a bargain.
     
  3. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Count on it. As these projects come to a close many offshore OTP buyers will all be seeking to sell before it settles to take a profit knowing they will have limited scope to finance the properties.

    Any foreign buyer with a OTP would have to be worried if they dont have cash.
     
  4. Jennifer Duke

    Jennifer Duke Well-Known Member

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  5. melbournian

    melbournian Well-Known Member

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  6. Skilled_Migrant

    Skilled_Migrant Well-Known Member

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    Cannot find the link, but I did read about the developer's negotiating with their banks allowing vendor finance, so the existing developer loans roll over to the buyers.
    That should take some off the sting off.

    But some of the developers would be having sleepless nights.
     
  7. EN710

    EN710 Well-Known Member

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    With a darn good rate too.
    Financing from Singapore is cheap if you can actually qualify.
     
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  8. melbournian

    melbournian Well-Known Member

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    Suprise - only foreigners can access these and it not only singaporeans, but investors from china, malaysia, indonesia, thailand, brunei all do it although those aussies in the know will use shell companies to get around it.
     
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  9. Daniel Taborsky

    Daniel Taborsky Well-Known Member Premium Member

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    The Victorian government is also doing their part to encourage foreign investment... They recently raised the additional stamp duty payable by a foreign purchaser from 3% to 7% (that's more than the 'ordinary' stamp duty)! They also hit them with a 1.5% land tax surcharge each year!
     
  10. Gockie

    Gockie I'm an ISTP-A female, so I might be a bit quirky! Premium Member

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    With that policy I can see more investment diverting into other Eastern Seaboard states...
     
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  11. euro73

    euro73 Well-Known Member Business Member

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    That's far cheaper than what some SE Asian nations charge each others citizens to invest. Google the cost of stamp duty and exit duty in Singapore, Hong Kong etc... you may find that 7% is cheap by SE Asian standards...
     
  12. Gockie

    Gockie I'm an ISTP-A female, so I might be a bit quirky! Premium Member

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    Geez wow. I dunno but perhaps nothing will help affordability in HK except something like the threat of a SARS outbreak or the threat of China's Government overstepping its mark... if you want to buy there, you'll just have to suck up the high prices...
     
  13. chylld

    chylld Well-Known Member

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    Talking about HK or Sydney? ;)
     
  14. Gockie

    Gockie I'm an ISTP-A female, so I might be a bit quirky! Premium Member

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    Lol
     
  15. euro73

    euro73 Well-Known Member Business Member

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    You may want to sit down for this.... Here are the Singapore Stamp Duty Tables

    These are the PURCHASE costs Screen Shot 2016-05-11 at 12.11.14 AM.png

    These are the SALE costs . If you sell within 4 years you get quick a slug on the way out :)

    Screen Shot 2016-05-11 at 12.15.10 AM.png
     
  16. euro73

    euro73 Well-Known Member Business Member

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    potential problem with this is that many lenders don't like to refinance vendor finance.. so if they get prickly about it, the problem is just being deferred rather than resolved...

    I suspect what we are seeing here is temporary... its 2 months from June 30 and the big banks need to get under the APRA thresholds by then. Could be wrong, but this is probably more about the 10% I/O speed limits than a genuine problem with non resident lending.

    Think about it... the banks must surely have billions tied up in commercial exposure to these developers...so by staying closed off to non residents, they would be all but ensuring a financial disaster for these developments...and as they are stakeholders in the developments, they'd therefore be ensuring a financial disaster for themselves.

    So it's difficult , just for those financial reasons, to imagine the majors wont open up for non resident business again sometime after the APRA reporting deadline ( June 30) passes.. albeit with stricter criteria, but open again nevertheless...

    The alternative... if the extreme worst case is considered - could be something like this.

    30%,40% of buyers being unable to settle on the 100,000 + apartments currently under construction nationwide... that's the sort of thing that could cause billions in write offs for the banks as developers go belly up and the banks have to step in and do fire sales to get whatever they can get for the 10's of thousands of unsettled apartments , leading to quite severe apartment price corrections, which could then flow on to valuers catching that disease and taking a very dim view of all apartments full stop , meaning refinancing for apartment owners could become next to impossible for years. Worst worst worst case... a severe correction in apartment values could potentially also mean that billions more of existing settled bank lending secured by apartments could go into severe negative equity, which combined with billions in losses from the new apartment market, would certainly lead to severe ratings downgrades for the banks, which would then lead to severe shareholder losses , which would definitely affect dividend income for millions of shareholders and retirees, not to mention the damage to the ASX and broader economy. Then there's the big increases to their costs of funds that would follow...... and in the end if it got ugly enough it's possible that wholesale funding markets could stop funding and refinancing Australian RMBS... leading to our own Aussie credit crisis...

    We are a long long loooooong way from any of that, of course...but that scenario isnt all that far fetched if the majors were to leave gaping multi billion dollar holes in apartment funding availability for the next couple of years...and the domino effects were allow to grow momentum... it would be an absolute horror show. .. and that's why I suspect the banks have an eye on their June 30 APRA targets for now, but will protect their own interests in the end, and get back into non resident lending before the majority of this apartment stock starts rolling through to settlement in late 2016 and throughout 2017
     
    Last edited: 11th May, 2016
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  17. Skilled_Migrant

    Skilled_Migrant Well-Known Member

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    Couldn't agree more. The horror scenario that you have described has occurred before. TRA 1986, Japanese exodus. The contagion would not be limited to CBDs alone as the relative (apartments vs independent dwellings) costs of ownership would come into play for the FHBs and investors. Political policies (NG and Royal Commission) would have a severe impact on property sector as well. Sorry MT not exciting but uncertain times :(.
     
  18. emza

    emza Well-Known Member

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    The banks are really stuck between the rock and that hard place at the moment.

    A Royal Commission looming and widespread sentiment across the country that it is well deserved. OTP apartment prices dropping quickly and suddenly those billions lent out under less than credible circumstances are at risk.

    The banks are doing everything they can to avoid a Royal Commission - they know exactly what it would uncover. But by taking the steps to preserve themselves, they're almost bringing about a collapse. Cutting foreign investors does crash the apartment market and kill developers. But continuing the dodgy loans can't go on either.

    I think the banks are really in preservation mode right now. They've surely done the sums on apartment lending and it's entirely possible that some of them would approach default just on those loans.

    A lot of people thought lending to mining towns would be the big loss but it's looking like the inner city apartment bust could do it.
     
  19. chylld

    chylld Well-Known Member

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    Have you done the numbers on this? Which banks are going first, and by how much?

    Or is this just speculation?
     
  20. Wukong

    Wukong Well-Known Member

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    armageddon