Australia Global

Australian Real Estate Prices Are Inflated By Money Laundering, Hears The Senate

Australian lawmakers are learning how home prices have been inflated by money laundering. The Senate committee investigating the adequacy of anti-money laundering laws continues this week. A piece tabled is a study showing how high-profile individuals with questionable cash should have set off alarms. Instead, they were able to move millions of dollars of unknown origin into housing. Weak regulations have made Australia a magnet for using homes for money laundering. The result is higher home prices as families and money launderers compete for the same units.

Australia Ignored Warning Signs For Real Estate Purchases

A study by Transparency International Australia (TI) was tabled this week. The document outlines how real estate has become a popular tool for money laundering. One notable section is a list of high-profile people who presented obvious risks. Despite the elevated risk, they didn’t set off any alarms.

Some of the cases cited: 

  • A Sudanese General who purchased a A$1.5 million home in his son’s name, despite only earning A$60,000/year. 
  • A Malaysian banker currently incarcerated in Singapore for money laundering. Prior to his arrest, he had bought an A$8.2 million property through holding companies. 
  • A billionaire Chinese property developer who bought six homes for a total of A$37 million. He’s currently exiled from Australia on national security grounds. “He did not live in any [of the homes],” the organization emphasized. 

AUSTRAC Estimates $1 Billion Laundered From China In 1 Year

A report from AUSTRAC also called out Australia’s anti-money laundering rules. In one report, they estimate $1 billion was laundered from China from 2015 to March 2016. That’s just China. There are lots of other places with plutocrats looking to hide cash in countries with weak laws as well.

Since money launderers are buyers, they create more demand than usual. The extra demand, especially with falling interest rates, helps to push prices higher. Just this would be enough to be a concern, but it also impacts market behavior and dynamics.

Money launderers have an incentive to pay the most they can since it moves more money. The homes they purchase become comps for the neighborhood. As a home buyer, you don’t know if a home sold for 25% over asking because of exuberant buyers or a money launderer. You only know the next home in the neighborhood will see its market price influenced by it as a comp. This is how just a few homes used to move money can spark an exuberant market.

Weak Australian Regulations Make Real Estate Ideal For Laundering

Why Australia? The same reason it’s become popular in Canada — a lack of enforcement and weak laws. “The real estate sector has continually been identified as a weak spot and a large compliance hole in Australia’s AML/CTF regime,” said TI. 

Housing is an ideal option for money laundering since it’s expensive and often involves the state overlooking fraud (they just want a house!). Other factors such as, it’s not uncommon to see large amounts of cash used in transactions, something that doesn’t happen with stocks and bonds. Then there is the return on investment. Most forms of money laundering cost money, but using real estate can make the launderer money.  

“Criminals may be drawn to real estate as a channel to launder illicit funds due to the ability to buy real estate using cash, to disguise the ultimate beneficial ownership of real estate, the relative stability and reliability of real estate investments, and the opportunity to renovate and improve real estate, thereby increasing its value.” 

It’s not just great for laundering, but it’s relatively anonymous and profitable as well.

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  • Sam Huizenga 3 weeks ago

    Listening to Canadaland and other podcasts on organized crime in Canada…..and reporters & experts on the subject all point to Canada’s Real Estate market as having attracted billions in dirty money. In Vaughan and north of Toronto it’s the Mafia, in Vancouver it has been the Triads, the Cartels, Arabic Groups, Bikers…..you name it. I personally know a corrupt douche who brags about how it’s not only easy to clean your money through Canadian Real Estate, but you actually make more doing it than earning the dirty money in the first place. It’s a corrupt douche-bag’s paradise. Started in Vancouver, then Toronto …. all the way to WInnipeg, Halifax….attracting every corrupt douche on the planet.

    Wonder where our leaders are….. certainly not standing up for regular hard-working honest Canadians who are trying to live a decent life.

    • Sam Huizenga 3 weeks ago

      One podcast on Vancouver talks about how organized crime in Hong Kong flooded the Canadian market with drugs, fueling an opioid crisis in the east end, and then sending their kids to live in Vancouver mansions and enjoy all the freedoms and privileges of being Canadian. What a double slap in the face…..

      • Sam Huizenga 3 weeks ago

        And none of this is funded with taxable monies.

    • AtroubledCanadian 3 weeks ago

      Don’t worry, Bill Blair’s on the case. It’s only been 3 years you’ve got to give him some time!

  • Jamie 3 weeks ago

    No chance of being able to afford a home in Sydney. Tiny shoe boxes if you’re a millionaire. Sad to watch how they’ve prioritized property speculation over national health.

    • D 3 weeks ago

      Thanks to high cost of living, expensive everything, the vast majority of plebs have their wealth in their homes or underfunded pensions/retirements. When the everything bubble crashes the bottom 95% will have nothing except the shirt on their back!

      You can hardly find canadian data about canadian household wealth because they obfuscate everything here but in america you have a plethora of information about american household wealth via federal reserve data and half the people there have squat. Probably worse here.

  • Charlie Lee 3 weeks ago

    Australia, New Zealand, Canada, and the UK are all dealing with large amounts of Chinese capital flowing into the country linked to organized crime. It doesn’t take a genius to see what’s happening here.

    • Trader Jim 3 weeks ago

      Stephen had a good Tweet Storm the other day about this. He basically explained how the Queen lobbied to have royal wealth hidden from the public so as to not attract attention (so the official narrative goes). Commonwealth countries most likely were designed to conceal and hide royal wealth from litigation of their assets.

      Not discounting it might be a power play against four of the Five but there’s a reason they can do that in those countries instead of doing it in the US>

  • D 3 weeks ago

    Make it law that only Canadian CITIZENS may be able to purchase homes or companies that operate in Canada (have an office with workers) and pay tax to provincial and federal government. Ban foreign ownership if they dont have citizenship. Ban outside corporations like blackrock and blackstone from owning real estate if they dont have an office here. Ban the ability to buy citizenship. Its so easy to fix these problems but the aristocracy here stand to lose personal millions in bribes from foreigners and criminals.

  • Ben 3 weeks ago

    By the time you have saved enough for a down payment, the prices might be even higher.

  • Edward 3 weeks ago

    Now that the government have siphoned enough black money to power its ‘economy’ over the past 12 years, are we finally doing something that would tackle black money?

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