27.02.2019 at 03:36
image description

Labor Increasingly Scrutinized Over Real Estate Plans

Negative sentiment appears to be growing around Labor's positions on matters affecting real estate and other industries.

Real estate related media outlets have begun to sharply criticize Labor over their plans to reduce the scope of negative gearing, and reduce concessions on capital gains.

For the most part the disagreements seem to be more about the timing than the intentions. Though there is some of that too.

For one example, the Australian Financial Review (AFR) recently wrote that Labor was "targeting" accountants, lawyers, and real estate agents with its proposed changes related to "cross-border financial crime".

Among the measures they discussed was reversing cuts to the Australian Federal Police and the Australian Securities and Investments Commission (ASIC).

They are also looking at giving additional money to the Australian Transaction Reports and Analysis Center (AUSTRAC).

The impetus for these measures is, of course, the increasing realization that much of the foreign (including Chinese) money coming in to the Australian real estate market has been illegal, at least in respect to Chinese laws.

Anti-money-laundering laws were promised by the Morrison government but there have as yet been no such measures to pass Parliament.

It is true that a recent crackdown by the Foreign Investments Review Board (FIRB) is causing more divestment of property by foreign investors who have broken Australia's rules and who have been forced to sell.

And it is also true that China recently sent undercover investigators into Australia to try to recover some of the money that left China illegally.

This was reported by ABC last week in their show covering "Project Dragon".

Shadow Treasurer Chris Bowen said not enough has been done.

"We believe the best way to deal with transnational crime is through official cooperation, including arrangements that already exist between Australia and China."

But some have said these things are not going to have much effect on the amount of Chinese money coming in.

"The government has completely dropped the ball on money laundering reform. According to the government's own work plan, real estate agents should already be covered by our money laundering laws. The Liberals have done nothing to progress this.

"The Liberals aren't interested in prosecuting serious financial crime. They cut funding to ASIC, they planned to cut funding to the Serious Financial Crime Taskforce and they ripped hundreds of millions of dollars out of the Australian Federal Police, who work with our partners abroad to disrupt transnational organised crime."

Real Estate Institute of Australia (REIA) President Adrian Kelly said others besides the real estate industry should bear some of the burden.

"We are working with government on an approach that minimises the impact on agents because much of the information can be sought from others involved in the transaction process, including the banks and their conveying process."

At the same time Arthur Moses SC, President of the Law Council of Australia, said implementing the full regulatory package aimed at stopping international money laundering would conflict with lawyers' duties of confidentiality, and add additional legal costs and burdens to an already stressful situation.

On the other side, those who oversee financial crime say reforms have been waiting in the wings for more than 12 years, and not enough has been forthcoming.

But that is only part of the story.

There are also the looming change in taxes for foreigners and Australian expatriots, which some say would be leaving those who still own property in a bad position.

Coalition government has given expats until June to sell their Australian property if it constitutes their "main residence". That isn't a lot of time.

And according to Domain, many expats and foreigners are rushing to sell now, in anticipation of new laws they expect might be enacted.

However, Labor has claimed it will change the rules to protect these expats from new taxes. Mr Bowen made a statement about this as well.

"The Liberals have botched this from the very start and so it will be up to incoming Labor government to work through outstanding tax measures and iron out any unintended consequences.

"This process is just one of many instances where the Coalition has bungled housing policy. Labor meanwhile has listened to the concerns of the expat Australians.

"I wrote to Scott Morrison last year about the matter and we have also relayed our concerns to Josh Frydenberg. We have flagged issues like retrospectivity as matters we would be willing to discuss further."

Back on the other side of the coin, some 49 per cent of property investors polled said they would reduce investment if Labor implements their desired changes to capital gains taxes and negative gearing.

Of the general populace, 33 per cent said they would happily consider buying a new property, but that number dropped to 24 per cent who said they would if Labor's plans go through.

While opinions vary, news stories have increasingly been claiming that changes to negative gearing will not actually stimulate demand, as Labor claims, but will instead cause further slowing of an already depressed market.

Property Council of Australia CEO Ken Morrison said survey results challenge the ALP's assumption that its plans will boost the new property market.

"The ALP policy was first announced a few years ago when Australia’s residential property market was in a very different state.

"Since then, we’ve seen banks tighten up their lending, as well as changes to foreign investment rules, along with falls in residential property values in most markets."

As is so often the case, only time will tell.

If you are not yet subscribed to PropertyNerd News, you can subscribe here. Or share the link with your friends and colleagues.

Don't forget to follow PropertyNerd on Facebook and Twitter, or catch us on LinkedIn. And if you would like to leave us some feedback, contact us here.

Nerd light text