The billionaire owner of China’s Evergrande real estate bought one of the poshest homes in Sydney last year for A$39 million ($30.5 million). But now Xu Jiayin, who also owns Guangzhou Evergrande football club, has 90 days to sell off his limestone palace and the 1500 square metres of land that it sits on, or risk prosecution.
Evergrande bought the mansion in Sydney’s exclusive Point Piper area through a subsidiary in October last year, but apparently forgot to notify Australia’s Foreign Investment Review Board (FIRB) that the purchase was being made by what was ultimately a non-Australian company.
Billionaire Runs into Anti-Foreign Backlash
Now with Australia’s Treasurer, Joe Hockey, announcing last week that the country would begin taxing home purchases by non-residents, and reemphasise existing rules on declaring investments by overseas companies and individuals, Xu is being forced into a fire sale of his new Sydney home.
While non-residents are free to purchase newly built properties, existing structures can only be acquired by residents or citizens of Australia. And Xu’s mansion, complete with its retractable pool table, is definitely second-hand.
Although Australia has long required that overseas buyers of Australian assets register such acquisitions, the rule has long been overlooked. According to a report in the Australian Financial Review, the forced divestiture by Evergrande is the first such case since 2007.
“The rules are straightforward,” FIRB chairman Brian Wilson, was quoted as saying in the Review. “It’s an existing property you have to be either a resident, or a citizen or a temporary resident. You can’t be a foreign investor.”
Wilson apparently indicated that Evergrande had been given the opportunity to prove compliance with the restrictions on foreign investment before the forced divestiture was announced by Hockey to Australia’s parliament on Tuesday.
Surge of Chinese Homebuyers Fuelling Friction in Australia
The moves by Australia’s government to show that it is cracking down on real estate speculation by foreign buyers comes amidst an influx of wealthy Chinese into the market.
According to figures from FIRB and investment bank CLSA, China is now the leading source of foreign investment in Australian real estate, and the increasing enthusiasm among Chinese buyers is blamed for driving double-digit growth in home prices in the country’s largest markets.
Last year more than 20,000 Australians signed a petition demanding tighter rules on foreign ownership of Australian property.
According to data from real estate intelligence provider CoreLogic RPData, housing prices across Australia’s major cities rose 1.3 percent in January compared to December, and were up an average of eight percent over the same period a year earlier. Melbourne prices rose fastest at 2.7 percent month on month, with Sydney just behind with a 1.4 percent gain over December.