Significant Investor Visa – a new boom?

There is a game changing development for buyer agents and the Australian property sector. The new Significant Investor Visa scheduled for late November 2012 may well signal the start of a new property boom. The Australian Government has announced a new visa pathway for migrant investors coming to Australia. This program is targeting what the Government sees as potentially 10,000 egliible migrants who have demonstrated experience and success in business or investment. The Significant Investor Visa is particularly targeting Chinese migrants as evidenced by the fact that the Australian Government has named the new visas the 188 and 888. The number 8 is regarded as an auspicious number while multiple 8’s are considered very lucky! It could have a dramatic effect on residential property prices in the major cities of Sydney, Brisbane and Melbourne.

Key Components for Eligibility

Lets look at some of the key components of the new significant investor visa. Overseas applicants will need to:  
    • submit an expression of interest in SkillSelect
    • be nominated by a state or territory government
    • make investments of at least five million Australian dollars into AISC approved asset classes
  The complying investments include state or territory bonds, ASIC regulated managed funds and direct investment into private Australian companies. There are a few other investment parameters that the government is steering migrant investors towards but essentially they want the new capital inflow outside the domestic superannuation regime. Now where it gets significant for property buyers is the residency requirement under the new visa. The new migrant pathway requires 160 days spent in Australia over 4 years and 320 days over the 8-year period covering two visa extensions. This will have potentially huge implications on housing stock and prices.

Motivation for Residency Visas

Certainly the government has done its research. Just look at the tourism numbers from mainland China for the 12 months to August, 700,000 visitors and a growth rate of 15%.  But I sense confusion among the fund management industry hoping to get a slice of the $5.0 m of significant investment capital. They are missing the point in trying to design product to comply and deliver returns of 6 – 7% per annum if lucky. Does anyone really think Chinese Investors are coming to Australia for return? It’s my assessment that the key motivation for the significant investor migrants are as follows:  
  • A refuge destination should political and socio-econmic factors become unstable
  • An avenue to have their children educated in a Western Country
  • And finally a safe investment destination outside their current controls

Implications

Lets do the numbers to get a real picture of what the new visa class means for Australia. It is conservatively estimated there will be 10,000 migrants eligible. That means $50 billion for investment into managed funds and Australian Companies. If we assume the typical migrant investor with $5 million in investable capital will probably look to buy a house or apartment worth at least $1 m, then that equates to $10 billion of residential housing stock. It also means a huge surge in business for the Immigration Industry. But does that also mean the Migration Agents and Lawyers will now act as gate-keepers to the fund management industry and in a sense bypass the AISC approved financial adviser system? We will have to wait and see. It is not hard to see that even with moderate success in the new visa category, we will experience a huge boom in the Australian property sector. Hold onto your hats! “By Shane Clinton”

5 thoughts on “Significant Investor Visa – a new boom?

  1. Alauddin, the new visa will be launched on November 24th. The old visa system is in place and let me know if you need a contact with a migration specialist.

  2. I would like to know more about 188 Significant investor visa.
    I checked the terms online and it said that applicants can invest AUD5M to real estate so is that mean applicants can buy AUD5M property in Australia in order to get the 188 visa?
    It will be great if you can send me an email regarding 188 Visa.

    • Hi Agnes, There are certain requirements to the Visa and they vary across each state in Australia. Firstly, the Immigration Agent applies to the State or Territory government for case by case approval. Then the individual applicant must invest in a government approved managed investment scheme (like a pension fund). This is the $5.0m requirement. It can not go into direct residential property as such and as I said the states differ in their requirements. New South Wales for instance require the managed investment scheme to hold at least 30% in NSW govt. Warratah Bonds. The balance could be in a property fund or equity fund and the like. Theses schemes will be approved by the regulatory body called ASIC.
      Once this is done the applicant satisfies the residency requirement and then can buy real estate in their own name. I hope this helps and if you need contacts in Migration Law or Managed Investments please let me know. Regards Shane

  3. Hi Shane,

    I’m on the other side of the equation, we have a business that we’d like to sell and I feel would be of interest to a Significant Investor as part ($1.4m) of their $5m AUD business portfolio. However, my question is this; We are selling the freehold with the business (Roadhouse & Caravan Park, so it would be hard not to) and it seems there are restrictions on buying Property on this Visa. Would our business therefore still be eligible despite part of it being a Property sale / investment?
    Thanks for your time.
    Regards,
    Graham Jones

    Cousin Jack’s PTY LTD

    • Hi Graham,
      This is a very insightful question. If we look at what the government is trying to achieve, investment into Australia via MIS (managed investment schemes), setting aside the particular State requirements of bonds, we can probably address your point. A typical MIS has share holdings in companies like Westpac, Woolworths etc. and the share price reflects the value of the business which often includes property in their holdings. Really what you are trying to achieve is exactly the same. Selling a business that has a property component as part of it’s valuation. If this was bundled into a discrete managed investment scheme, and could be approved by ASIC, I can’t see why this wouldn’t bypass the exclusions to property ownership. It may well prove difficult to market to the right overseas buyer, and initial feedback we are getting is that Chinese Investors under this scheme are looking at this to secure a residence in Australia and not ongoing businesses, but your situation is certainly worth exploring with your financial adviser or accountant.
      Regards Shane

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