Pete Wargent blogspot

Co-founder & CEO of AllenWargent property buyer's agents, offices in Brisbane (Riverside) & Sydney (Martin Place), and CEO of WargentAdvisory (providing subscription analysis, reports & services to institutional clients).

5 x finance/investment author - 'Get a Financial Grip: a simple plan for financial freedom’ (2012) rated Top 10 finance books by Money Magazine & Dymocks.

"Unfortunately so much commentary is self-serving or sensationalist. Pete Wargent shines through with his clear, sober & dispassionate analysis of the housing market, which is so valuable. Pete drills into the facts & unlocks the details that others gloss over in their rush to get a headline. On housing Pete is a must read, must follow - he is one of the finest property analysts in Australia" - Stephen Koukoulas, MD of Market Economics, former Senior Economics Adviser to Prime Minister Gillard.

"Pete is one of Australia's brightest financial minds - a must-follow for articulate, accurate & in-depth analysis." - David Scutt, Business Insider, leading Australian market analyst.

"I've been investing for over 40 years & read nearly every investment book ever written yet I still learned new concepts in his books. Pete Wargent is one of Australia's finest young financial commentators." - Michael Yardney, Australia's leading property expert, Amazon #1 best-selling author.

"The most knowledgeable person on Aussie real estate markets - Pete's work is great, loads of good data and charts, the most comprehensive analyst I follow in Australia. If you follow Australia, follow Pete Wargent" - Jonathan Tepper, Variant Perception, Global Macroeconomic Research, and author of the New York Times bestsellers 'End Game' and 'Code Red'.

"The level of detail in Pete's work is superlative across all of Australia's housing markets" - Grant Williams, co-founder RealVision - where world class experts share their thoughts on economics & finance - & author of Things That Make You Go of the world's most popular & widely-read financial publications.

"Wargent is a bald-faced realty foghorn" - David Llewellyn-Smith, MacroBusiness.

Monday, 29 August 2016

Significant Investor Visa interest dampened

Lucky 888?

According to the Department of Immigration and Border Protection (DIBP) the significant investor visa (SIV) programme is designed to be:

"...a pathway to provide for significant migrant investment into Australia under the Business Innovation and Investment visa programme".

From the inception of the SIV programme in November 2012 until 30 June 2015 there had been some 2,573 applications lodged, but only 879 visas actually granted.

There can necessarily be a lag between application lodgement and visas being granted.

The service standard is 6 to 9 months for the Business Innovation and Investment category.

The latest available statistics from the DIBP showed that 495 of the outstanding applications lodged prior to 1 July 2015 have now been granted.

A further 20 applications lodged after 1 July 2015 have also been granted in the financial year to 31 May 2016.

This means that the May 2016 figures recorded a total of 515 SIVs issued for the 11 months for the financial year to date.

The geographically segmented figures show that high net worth applicants are overwhelmingly focused on Melbourne, and then Sydney...with daylight third. 

This reflects that Melbourne and to a somewhat lesser extent Sydney have been the two key destinations and markets of interest for Chinese investors since around 2012.

Indeed, the Foreign Investment Review Board (FIRB) Annual Report showed that real estate applications tripled in two years, driven overwhelmingly by a deluge of Chinese investors into Victoria, New South Wales, and Queensland. 

The DIBP statistics for the top five source countries correspondingly show that more than 90 per cent of applicants for SIVs have also been Chinese. 

The wrap

Since the commencement of the significant investor visa programme in 2012 there have now been a total of 1,397 SIVs granted, leading to just a shade under A$7 billion of investment in complying assets.

It's difficult to say what the expected take-up for the SIV ever really was, but fewer than 1,400 visas sounds suspiciously like a fizzer of an initiative to me (albeit the composition and destination of applicants says something of note about where capital invested in Australia is coming from and where it is headed to).

Previously SIV investors were opting to drop money into passive investments such as qualifying government bonds and residential real estate schemes - not really what Australia needs more of, tbh! - which led to a much-needed reassessment of the requirements for complying investments.

Unfortunately interest in SIVs has been dampened since, following consultation with stakeholders, the rules were amended to require a greater share of the $5 million required investment to hit up venture capital products (at least 10 per cent) and emerging companies (minimum 30 per cent), investments that are typically associated with a higher risk of loss, whether perceived or real.

Source: DIBP

The most timely available statistics for expressions of interest, invitations, and applications lodged suggest only a modest ongoing flow of interest in the SIV.

Requiring wealthy Chinese with A$5 million to invest in venture capital projects and emerging companies is a fabulous idea...on paper.

In reality, however, this may be too ambitious and result in the killing off of SIV applications given that wealthy foreigners are unlikely to be familiar with the products and ventures in question, and therefore remain understandably reluctant to commit.

It wouldn't be a surprise to see the rules amended again or relaxed to allow Chinese investors to provide project funding (not passive investment) for residential and commercial real estate developments, or for infrastructure projects.