Firms hiring as Chinese property investors swoop into Qld

Chinese capital is pouring into the Brisbane and Gold Coast property markets at a rate “never seen ever before”, prompting law firms to expand their offerings, one partner says.

Felicity Nelson • 10 August 2015 • NewLaw

Sydney and Melbourne have seen property prices shoot through the roof in recent years, partly as a result of growing inbound investment from China.

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Now Brisbane is seeing a spike in interest from mainland China, with investors engaging in bidding wars over development projects of unprecedented scales.

“We've seen a massive up swell of inbound investment in south-east Queensland from mainly Chinese investors and development companies in the last six months in particular,” said Andrew Johnson (pictured), who heads up Mills Oakley’s Brisbane property team.

Chinese purchasing intent increased 17 per cent in Q2 2015 compared with the same period last year, according to Juwai.com.

“The Melbourne market was the first to be hit, then the Sydney market and Brisbane is always a bit slower and lags behind [but] we're certainly in the middle of the wave now. I can't see this slowing down up here for the next 18 months,” said Mr Johnson.

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This “phenomenal” upturn has had a “very positive impact on workflow”, he continued. Firms like Mills Oakley are starting to position themselves in the market to get as much inbound work as possible.

“I've been forced to seek out the best people I can find who have got experience in dealing with Chinese clients,” said Mr Johnson.

He recently hired two new senior lawyers to work in the Brisbane property team. Special counsel Damiano Castelli joined six months ago, after over a decade at King & Wood Mallesons.

Construction partner Rechelle Brost moved across to Mills Oakley in July, after working at Norton Rose Fulbright in Brisbane for 13 years.

Mills Oakley also recruited a Sydney-based special counsel, Natalie Ng, last year. Ms Ng speaks Mandarin fluently and some Cantonese.

Mr Johnson said Chinese investors are going head-to-head over development projects with Australian industry heavyweights such as Metro Property Development, Meriton and Mirvac.

The competitive market is forcing Chinese buyers to pay “top dollar” compared to what the Australian market would pay.

The site of the former Iluka tower on the Gold Coast, for instance, has been acquired by Chinese group Forise Holdings, which plans to build a $1 billion resort with 693 luxury apartments.

“That's enormous for the Gold Coast to get a tower like that being built. It's a billion-dollar tower. They haven't done towers like that ever – even Q1 wasn't that big,” said Mr Johnson. (Q1 is a skyscraper in Surfers Paradise that holds the record as the tallest building in Australia.)

Similarly, a 221-apartment tower in Brisbane worth $120 million was recently approved as a joint-venture between Property Solutions and China-based Chiwayland International.

“Looking around Brisbane there are more cranes on the horizon … than there have ever been before,” said Mr Johnson.

While the boom in inbound investment in real estate is good for business, Mr Johnson acknowledged that Chinese buyers could be driving the price of property up and locking younger generations out of the market.

However, the profile of Chinese investors in Queensland is different to those in other parts of Australia, he continued. Chinese buyers are increasingly interested in living in the properties they purchase.

“There are a large number of middle-band, high-net-worth Chinese … wanting to move close to the sun, the great outdoors,” said Mr Johnson. “It's a nicer place to live up here sometimes [compared with] Melbourne and Sydney … and I suppose we are a closer destination to China.”

The movement of capital from Asia to Australia has been encouraged by recent free trade agreements, according to Mr Johnson.

“The Australian government is obviously indicating to the overseas market that we are open for business.”

Mr Johnson doubted that the flow of capital to Australia was a response to a crackdown on corruption by the Chinese government, as has been suggested in the press.

“I'm not an expert in forensics and money laundering but we've got one of the safest banking systems in the world in Australia,” he said.

“We have high security … in terms of money laundering and that kind of thing so it would be difficult for that to take a foothold here like it has in some other countries."

Tim Tuesday, 11 August 2015

I agree with Chris Douglas here.Refer to this link here, <a href="www.macrobusiness.com.au/2015/06/stop-mo...-kids-can-buy-homes/" rel="nofollow">www.macrobusiness.com.a...</a>It is worth pointing out that the Paris-Based Financial Action Task Force (FATF) on money laundering in April released its report on Australia, which found that Australian residential property is a haven for international money laundering, particularly from China. The report also recommended that Australia implement counter-measures to ensure that real estate agents, lawyers and accountants facilitating real estate transactions are captured by the regulatory net [my emphasis]:Australia remains at significant risk of an inflow of illicit funds from persons in foreign countries who find Australia a suitable place to hold and invest funds, including in real estateâ€¦Large amounts are suspected to be laundered out of China into the Australian real estate market. China and other countries within the Asia-Pacific region were also seen as likely sources of corruption proceeds that are laundered in Australiaâ€¦Most DNFBPs, including real estate agents and legal professionals, are also not subject to AML/CTF controls or suspicious transaction reporting obligations, even though they are highlighted as being high-risk for ML activitiesâ€¦The authorities should place more emphasis on pursuing ML investigations and prosecutions at the federal as well at the State/Territory level.

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2 cents Tuesday, 11 August 2015

It is not uncommon for foreign nationals to purchase Australian properties even when they don't have PR. Often properties are purchased for the benefit of children studying in Australia and these children are entitled to remain in Australia post graduation on a medium term or permanent basis. Secondly, foreign nationals may purchase an "off plan" property while a PR application is pending or thirdly they can live in Australia on a semi-permanent basis, while complying with the terms of their visa, e.g by leaving and reentering the country as required. In short, the line between investment and migration is becoming increasingly blurred. The statement that Chinese are buying properties not just as investments, but with a view to retaining them for personal use is a fair reflection of the situation.

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bda 2206 Monday, 10 August 2015

" Chinese buyers are increasingly interested in living in the properties they purchase." ... Because you can just buy a property in Australia and then move in. even as a foreign resident."we've got one of the safest banking systems in the world in Australia" ...needing to raise billions of capital as we speak, highly leveraged on our housing bubble.who exactly is spouting this nonsense?

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Chris Douglas, APM Monday, 10 August 2015

Dear Felicity, I worked for the Australian Federal Police for over 31 years before starting my own consultancy business in 2014. During my time in the AFP I conducted investigations into money laundering, corruption, fraud and drug trafficking and recovered the proceeds of crime using Commonwealth forfeiture legislation. In the last 4 years of my service I designed and delivered money laundering workshops in Australia and overseas, including to police and to prosecutors in China. The workshops explained how money laundering occurs, how to investigate it and how transnational organised crime operates.I cannot agree with the comment made in the article namely "in terms of money laundering and that kind of thing so it would be difficult for that to take a foothold here like it has in some other countries". While Commonwealth criminal money laundering laws are tough and effective (Division 400, Criminal Code Act), the Anti-Money Laundering and Counter Terrorism Act 2006 that provides for the regulation of anti-money laundering compliance in Australia as it applies to the real estate sector and to professionals is weak. It is very easy for a foreign criminal, including a corrupted official to purchase property (real and personal) in Australia. Various money laundering techniques are applied to achieve this including using international business corporations based in secrecy jurisdictions (for example BVI and the non disclosure laws that operate in them), combined with the use of offshore professional nominees (working on volume and commission to earn a living) and family members, friends, foreign students and professionals situated in Australia. Combine any or most of those elements with the control of an Australian private company and weak know your customer processes applied by Australian banks and it is easy to overcome Australia's AML/CTF framework and also Australia's foreign investment laws to acquire property.The latter is an additional concern for Australian business and also for foreign investors who want to purchase property with legally earned money. If the foreign investor sends money to Australia to purchase property illegally (although the money is legitimately earned) the funds become an instrument of crime under Commonwealth Money Laundering laws (not the AML/CTF Act). Any person involved in the transfer or receipt or use of the money in Australia (e.g. bank, real estate agent, settlement agent, solicitor), in addition to the purchaser could be charged with criminal money laundering, where it could be shown they had knowledge of the intended use of the money or where they acted recklessly or were negligent. Further where an Australian property that has been purchased illegally by a foreign person is sold (whether or not under the direction of the Australian Treasurer), the proceeds of the sale become proceeds of crime and any person or entity that deals with that property or with the money could be charged with criminal money laundering provided the fault elements could be established. Commonwealth money laundering laws have extra territorial reach and any Australian citizen or resident or Australian company can be prosecuted for money laundering (provided the physical and fault elements are established) no matter where the activity occurs or where they are living. The provisions also apply in certain circumstances to foreign persons residing outside of Australia who have purchased Australian property illegally or who have laundered illegal money in Australia. These are issues that are not being considered in the debate currently being held in Australia about foreign property ownership and the forced sale by the Federal Treasurer of illegally purchased property. Regards Chris Douglas Trading as Malkara Consulting Perth, WA

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