Opening up resale opportunities in Australia to foreign investors

February 16, 2015 1:59 PM SGT

Join our Telegram channel and follow our Facebook for the latest update.

SINGAPORE: Dominique Grubisa, founder and CEO of Australian Investment & Migration, spoke at her first property investment seminar in Asia last year.

It was in Kuala Lumpur.

“The response wasn’t what I thought,” she says.

“It was much bigger in terms of high-net-worth clients.

I didn’t expect to see that kind of wealth.” Grubisa even opened an office in Singapore last September, and intends to open another in Hong Kong later this year.

She was in Penang on Jan 20, and flew to Singapore to give a talk to a packed audience later that evening.

She will be speaking at a conference in Singapore in March, followed by another in Hong Kong and Shanghai.

Having made a name for herself in the educational property seminar circuit in cities across Australia, Grubisa is now lending her expertise to Asian investors who want to get a foothold in Australian real estate.

She started Global Property Education last June, and renamed the company Australian Investments & Migration in December.

In Australia, Grubisa has built her reputation as a debt and commercial law specialist over the past two decades, as a practising barrister since 1996 and, prior to that, as a solicitor since 1994.

As a legal practitioner, she also carries a licence as a migration agent.

Grubisa has a formidable rolodex of contacts in banking and finance as well as the real estate industry.

She is the author of books such as Real Estate Riches Down Under: How to Make a Fortune Investing in the Australian Property Market and Managing Debt: Turning Your Finances Around.

She is sceptical of developers who hold property investment seminars in Asia.

“The developers disguise them as educational, but they are not,” she says.

The fact that she is not a property agent or developer “flogging” a property development is an advantage to foreign investors.

“I can better advise them if it’s a good or bad investment, but they will still have to do due diligence,” she explains.

‘Off-plan’ Currently, in Australia, foreigners are allowed to buy only new properties sold off-plan by developers or new properties that have been approved by the Foreign Investment Review Board (FIRB).

Foreigners are not allowed to buy pre-owned property in Australia.

And when they sell their property in the secondary market, they can sell only to Australian citizens or permanent residents.

According to Grubisa, however, developments sold off-plan are not the only things that foreigners can have access to.

“But [offplan developments] are the only things that can be legally marketed here in Asia,” she explains.

“Such projects make up less than 1% of the property in Australia.

So, it’s just the tip of the iceberg.” Grubisa recalls speaking to a banker who related the anecdote of a foreigner who paid A$1 million ($1.1 million) for an apartment purchased off-plan only to find that when he wanted to sell it, the bank valuation was only A$600,000.

While visiting Gold Coast in Queensland one day, Grubisa encountered a similar scenario.

She came across a beautiful apartment that was owned by a foreign investor who had paid A$1.2 million for the unit.

The owner struggled to find a buyer, as a development next door had units offering the same view, similar-quality finishes and completed just two years earlier, that were priced at A$600,000.

Grubisa believes she has found the remedy for foreigners locked out of most resale market opportunities Down Under.

She has formulated a process and legal structure that will enable non-Australians to invest in Australian property “safely and in compliance with Australian regulations”, she says.

“It’s brand-new.

I’ve just dusted off the patent for it.” The patent is for the process, including the structuring of companies, which will allow foreign investors to purchase properties.

“It’s not just any company,” emphasises Grubisa.

“It has to be of a certain company structure which I’ve patented.

Not just anyone can do it.

I’ve joined all the dots, put the system and process in place for [foreigners] to be able to buy.

So, they can technically have access to the resale market.” There is no limit to the number of properties they can purchase using this structure, she adds.

With her patented structure, more opportunities could open up for foreign investors in Australia.

“Most migration agents can help obtain a student or skilled migrant visa”, Grubisa points out, “but no one I know can obtain a SIV [Significant Investor Visa] and allow the complying investment to be in property.

That is our unique selling point.” On the other hand, most migration agents will encourage the investment to be in managed funds or government bonds, which gives the investor little control, she explains.

‘Golden visa’ The SIV scheme was introduced by the Australian government in November 2012.

The minimum investment is A$5 million, and visa holders must stay at least 40 days a year over a four-year period before qualifying for permanent residence.

The scheme attracted 1,462 applicants from November 2012 to December 2014.

It attracted a total of A$5.92 billion investments, of which about A$2.975 billion has been invested in complying assets, with another A$2.945 billion proposed to be invested.

As at end-December 2014, the top five nationalities for which visa applications were granted were: China (88.7%), Hong Kong (3.5%), South Africa (1.3%), Malaysia (1%) and Japan (0.8%).

A “premium” SIV was announced last November targeted at wealthy foreigners with at least A$15 million to invest in certain assets.

The visa will give them a fast track for obtaining a permanent residence after 12 months.

“I believe the premium investor visa is an attempt to attract high-net-worth investors who do not want to wait four years and have to spend 160 days in Australia,” says Grubisa.

“They get PR in a year without the obligation of having to spend a certain amount of time in Australia.

The A$5 million visa will remain for those who do not mind waiting four years and having to spend 160 days in Australia.” The signing of the China-Australia Free Trade Agreement last year now allows Chinese investors to buy commercial property up to a value of A$1.078 billion without requiring FIRB approval.

This puts them on equal footing with US and New Zealand investors.

The current commercial property limit is A$54 million.

The existing screening of residential property purchases still applies, though.

Nevertheless, Chinese investors are already making headline transactions in Australia.

The standout property deal last year was the sale of a mansion called Villa del Mare in Point Piper, the most affluent waterfront suburb in Sydney, where the likes of Australian moguls James Packer and Lachlan Murdoch (elder son of Rupert Murdoch) own homes.

The Mediterranean-style Villa del Mare, previously owned by Australian recruitment boss Julia Ross, fetched A$39 million in October, topping four other transactions in Point Piper last year that were above A$30 million each.

The property was reportedly sold to an Australian company called Golden Fast Foods Pty Ltd, which is controlled by Chinese billionaire Xu Jiayin, chairman of Guangdong-headquartered real estate developer Evergrande Group, and China’s 15th richest with a net worth of US$7 billion ($9.4 billion), according to the Hurun Rich List 2014.

In 2013, the most expensive mansion sold in Australia was also in Point Piper — a property called Altona, which fetched A$54 million.

The buyer was said to be Chinese businessman Xiuzhen Ding, a resident of Elwood, a beachfront suburb in Melbourne, who purchased through his investment company Chimovich Investments.

According to Grubisa, the only way for a foreigner to purchase a property in Point Piper is to be an Australian resident or via a company structure similar to the one she has patented.

Opening up new asset classes Many Chinese companies are interested in buying agricultural and dairy farms, as well as in tying up with locals to manage these assets, says Grubisa.

Last November, for instance, Australian mining tycoon Gina Rinehart agreed to invest A$500 million in partnership with Chinese state-owned company China National Machinery Industry Corp to form Hope Dairies Ltd, one of Australia’s largest dairy farms, to produce premium infant formula, which is seeing soaring demand in China.

Grubisa also sees foreign investor interest in resort properties, luxury hotels, major wineries and vineyards.

In addition to investing, foreigners are also looking at Australia as a “desirable destination” when it comes to education, she adds.

Many want to send their children to Australia for their education, and eventually to obtain permanent residence.

Naturally, Grubisa’s structure of buying property in Australia has attracted much interest from investors in China and Hong Kong.

For Singaporeans, the interest has been in buying property using her patented structure, she says, “[and] not to live in Australia, as they are happy where they are”.

This article appeared in the City & Country of Issue 661 (Jan 26) of The Edge Singapore.

Follow our channels to receive property news updates 24/7 round the clock.

Subscribe to our newsletter