Preface Most comments on foreign investment in Australia are based on lack of data, as recent surveys of foreign investment in residential real estate show. At present, it seems that the only agency that collects data on this sensitive issue is the Foreign Investment Review Board, and it seems limited. Even the Australian Bureau of Statistics and the Reserve Bank admitted in O’Dwyer’s survey that its staff rely on trade magazines and newspapers to determine foreign real estate purchases.
Let’s first look at the definition of foreign investment In economics, investment refers to the increase (positive or negative) flow in the stock of assets or store of value over time. Investment is important because it contributes to the production capacity of the economy. Residential property investment increases the flow of housing services. The term foreign investment is often used loosely. It includes assets added by foreigners, such as assets increased by internal financing or asset improvements, or supplemented externally through the purchase of new equity. But this may also include transferring ownership of existing assets from local to foreign countries, for example by purchasing existing equity. For its part, this will keep the asset stock unchanged. The transaction price is subject to supply and demand. They may be different from the increase or improvement of production to the speculation before the outbreak of the global financial crisis. This is another reason why the measurement of foreign investment may not easily distinguish between an increase in assets and an exchange of existing assets. In addition, it can be used to identify the reason why foreign investment transactions are not recorded. Many foreign investment transactions involve the buying and selling of entities, which are themselves a mixture of domestic and foreign ownership. The International Monetary Fund has rules on how to classify the various levels of foreign ownership involved in transactions. “Direct investment” refers to a situation in which residents of one economy directly or indirectly control the management of enterprises in another economy or have an impact to a large extent. According to experience, the value of the entity involved in the transaction exceeds 10%.
Data collection requires resources
As with any data, the quality of foreign investment data is only as good as the amount of resources used for collection, and this is historically determined. Australia has two main sources of foreign investment data, FIRB and ABS. The National Property Rights Transfer Office did not record the nationality of the parties in the property transfer. There is a trade-off between the increase in the cost of increasing data collection and the benefits of additional information obtained from that data. For national data, this is always a political issue, not only in determining the total funds or additional funds used for data collection, but also within the distribution of each area indicated in the access and benefit-sharing document. The Ministry of Finance budget document does not provide a plan to increase access and benefit-sharing resources, nor does it specify the purpose of expenditure (except for the census). Let’s look at property as a special category of foreign investment. The difficulty of recording foreign investment data is widespread-Australia is one of the few countries that provides any data on foreign land ownership. In terms of real estate, the asset stock includes land (and decoration), buildings and other tangible structures that have been built. Since the land itself must be retained as an asset on Australia’s national balance sheet, even if it may have foreign owners, this leads to the question of whether foreigners or domestic people own property. This involves an individual assessment of the land. Otherwise, the land will show up as an asset in another country on the balance sheet. ABS data for real estate cannot be divided between foreign and local ownership, nor between commercial and residential. ABS includes foreign investment in real estate for the purchase of Australian equity in “other business services”, which includes legal, accounting, marketing, computing and scientific services, with a total value of approximately A$33 billion in 2013.
Collect FIRB data for other purposes
ABS also uses data provided by FIRB to understand the investment intentions of foreign investors outside of the Australian corporate structure. The value in 2013 was estimated at 24 billion Australian dollars. FIRB data is based on the applications it receives. It only includes the value of foreign investment with an amount greater than the application threshold. At present, commercial investment from most other countries is 248 million Australian dollars. The threshold is low or zero, which is suitable for real estate or government investors. It is not clear how to deal with duplicate and unsuccessful applications. Australian immigration has increased foreign investment assets by 48 billion Australian dollars. The overall share of foreign ownership of Australian real estate appears to have increased by 3% of total foreign investment. The Reserve Bank of Australia estimates that foreign investment is at most 5-10% of residential transactions, which is half of housing transactions. This is because the investment is made in high-priced housing. This makes the possible proportion of the total housing owned by foreigners unknown, but it may be very small.
what do you need?
The Australian Bureau of Statistics recommends that if comprehensive data on foreign real estate investment is prioritized, FIRB and state government transfer and title offices may be required to collect data. According to access and benefit sharing, the required data includes: Market value of the transaction property Settlement date Investor’s right of abode The buyer’s residence status in Australia The seller’s right of abode, and Whether the buyer is a company or an individual. Whether foreign investors are governments can be added to the list. Although the access and benefit-sharing proposal requires cost calculations and political will, it seems to suggest improvements to the data in this area.
