Keeping an eye on Communist, Totalitarian China, and its influence both globally, and we as Canadians. I have come to the opinion that we are rarely privy to truth regarding the real goal, the agenda of Red China, and it's implications for Canada [and North America as a whole]. No more can we rely on our media as more and more information on China is actively being swept under the carpet - not for consumption.
Saturday, April 23, 2016
The weight of Chinese money adds to the cost of housing -once a social issue, now a problem
The weight of Chinese money
adds to the cost of housing-once a social issue, now a problem
The Evergrande Real Estate Group in China recently received a $20 billion bailout (US$16.2 billion) from a group of state-controlled banks which extended it a line of credit to protect the company from insolvency.
That's $20 billion, not million.
The chairman of Evergrande is Xu Jiayin, also known as Hui Ka Yan, regarded as the biggest home-builder in China, has a troubled Australian connection.
Last November, Xu paid $39 million for Point Piper mansion Villa del Mare, a transaction made via a series of shelf companies to avoid the foreign ownership laws.
The federal government examined the high-profile purchase, found it contravened the law on foreigners buying residential property, and ordered the Sydney mansion sold within 90 days.
It only took 60 days to find another Chinese buyer willing to pay $40 million for the property. It sold last week to a Sydney resident with extensive business links in China.
Meanwhile, back at Evergrande, big-spending Xu's real estate empire is so stretched, in a nationally contracting housing market, that the government, via surrogates, is keeping it solvent.
Beijing doesn't want a contagion from the mayhem enveloping another nationally important property developer, Kaisa, which has achieved the negative trifecta of financial distress, a plunging share price and a corruption scandal.
The Kaisa scandal coincides with a nationwide anti-corruption drive, instigated by President Xi Jinping, which has enmeshed hundreds of thousands of government officials. It has precipitated a recession in the gambling centre of Macao, a honeypot for laundering money in the grey economy.
The crackdown has caused capital flight, with many Chinese keen to place assets out of the sight and reach of the government.
Australia has long been seen as a safe haven for Chinese investors, especially real estate in Sydney and Melbourne, and the local property industry has been a sieve for investments that would not pass the Foreign Investment Review Board guidelines if investigated.
As the $20 billion bailout for Evergrande shows, the amount of money sluicing through the volatile Chinese real estate sector is enormous, at a time when the Australian government is looking for more investment from China.
From July 1, Australia is offering a Premium Investment Visa (PIV), which requires an investment of $15 million. Applicants can earn permanent residency in just 12 months.
Application is by invitation only, via Austrade. Specific requirements have yet to be settled in detail.
Also from July 1, the government is introducing a revised version of the Significant Investment Visa (SIV), where $5 million, invested over four years, qualifies the applicant for permanent residency.
The new SIV will require at least $500,000 invested in Australian venture capital or start-ups, and another $1.5 million, at least, invested in a managed fund listed on the Australian Stock Exchange.
The balance, up to $3 million, must be invested in companies listed on the ASX, or corporate bonds, or property, with a cap of 10 per cent on residential real estate.
The SIV program has caused some embarrassment to the former NSW deputy premier, Andrew Stoner. A Greens MP has accused him of making a change to the SIV rules that benefited a company, Moelis Australia, which Stoner has joined since leaving politics.
However, the change did not specifically benefit Moelis. It simply removed a requirement on visa applicants that worked to the advantage of banks.
Stoner told Fairfax Media he was confident that the parliamentary ethics adviser's report would show he had done nothing wrong. It appears to be a storm in a teacup but shows how easy it is for government officials to be compromised by the investment rules they make.
In China, the blurring of official support and private gain has been happening on an industrial scale for decades, hence the severe impact of the crackdown by Beijing.
The movement of funds from China, from both the formal economy and the grey economy, will continue to have a ripple effect on the housing markets of Sydney and Melbourne, and those ripples appear to be widening.
For young people seeking to enter the property markets in Sydney or Melbourne, it is just one more thing to make housing affordability a mirage.
In Canberra, both the Coalition and Labor support a gangbuster immigration program. This has a direct effect on local real estate pressures.
Tax policy is also encouraging self-managed superannuation funds to buy up investment properties.
The rental market is tight, which absorbs discretionary savings of would-be home-buyers.
Interest rates are low, but this is a tide which lifts all boats floating on cheap debt.
Thus housing affordability for the generation wanting to establish its own households, the nest-builders, continues to be a social issue.
If housing affordability continues to be seen as a mirage by the young, then a social issue, in time, becomes a social problem.