Government initiatives to further boost inward investment

Prosperity Fountainguard Advisers welcomes the Federal Government initiatives announced under the Industry and Competitiveness Agenda that will expand the Investor Visa Programme.

The Government will reform the programme to encourage more high net worth individuals to make Australia home and to better direct additional foreign investment, while maintaining safeguards to ensure the migration programme is not misused. The changes to the programme will:

  • streamline and enhance visa processing, further promoting the programme globally and strengthening integrity measures, to both increase the attractiveness of investing and settling in Australia while ensuring Australia’s interests are protected;
  • align the criteria for complying investments with the Government’s national investment priorities. The investment eligibility criteria will be determined by Austrade in consultation with key economic and industry portfolios;
  • introduce a Premium Investor visa (PIV), offering a more expeditious, 12 month pathway to permanent residency than the SIV, for those meeting a $15 million threshold;
  • and task Austrade to become a nominating entity for SIV (complementing the current State and Territory government’s’ role as nominators) and to be the sole nominating entity for PIV.

We led a nine city investor roadshow throughout China in June, and saw that although there is strong interest in Australia as an immigration and investment destination, and there is a reasonable pipeline of SIV applications, we face strong competition from other jurisdictions. Recent changes in NSW have made this State more attractive with the removal of the need to invest $1.5m in Waratah Bonds recently removed and the Commonwealth measures will only assist to further attract high wealth investors in the future.

Discussions with potential investors in China revealed certainty and clarity of the process were issues that are front of mind for potential SIV applicants when considering which country to pursue.  While the initial detail is scant, it appears the initiatives proposed will assist on those fronts. There is uncertainty in other countries SIV programs at the moment and the Government’s focus to enhance the scheme and encourage investment in the right areas as well as remove red tape will continue to make Australia an attractive destination.

Prosperity Fountainguard have a second investor delegation en route to Shanghai at the moment and they will present to over 20 potential investors in the higher net wealth category who are looking to invest $20m plus in Australia.  The proposed Premium Investor Visa will no doubt assist that group with their decision making and the revised program commencing in 2015 that allows an applicant to gain residency after twelve months is likely to be highly attractive.

We are eager to understand the detail of the new investment eligibility criteria.  These are no doubt designed to temper some of the strong interest in property development.  However, if the measures are too prescriptive, it may serve to stifle investor inflows or move them away from areas that Chinese investors are typically attracted to.

Significant investment in Australia – a growing Asian trend

At Prosperity, through our extensive global alliances with LEA and IAPA, we are noting that foreign investment into Australia continues despite the softening economy.

Barely a week goes by without an enquiry from our USA, UK or Asian colleagues seeking advice on Australian investment and regulatory issues. More recently we are fielding enquiries from those seeking to migrate using a Significant Investment Visa.

In fact, in the coming financial year, immigration lawyers, BasisPoint predict there are more than 1000-1500 significant investment visa applications expected for investors and their families. An annual quota of approximately 7400 visas has been allocated as investors and their family members elect to move here under the Business Innovation and Investment Visa program.  With an average of 3.5 people per family unit the upper limit would sit at 2114 as a real ceiling to the quota.

The Significant Investor Visa program for Australia was only launched in November 2012, and this year is expected to yield $6b in annual inflows to Australian funds and businesses from ultra high net worth investors, predominantly from Asia.

Foreign investment in Australia isn’t a new thing, but investment coupled to migration is certainly on the rise with dramatic increases in interest from China and other Asian nations.  China was ranked as Australia’s third largest foreign investor ($16.2b) in the 2011/12 financial year, behind the US ($36.6b) and the UK ($20.3b), but Chinese foreign investment arrived in much smaller parcels.  The average deal size done by Chinese investors was $3.4m which contrasts with the average US sourced deal size of $136.6m.

The most common deals done by investors were in the resources and real estate sectors, accounting for 32% of all foreign investment over the year.

What this says to us is that the Chinese investor is out there looking for investment opportunities that are smaller in size and more accessible. Asian clients we have represented are taking a drip feed approach with bite sized investments initially as they seek to understand our domestic markets and regulatory regimes.

But what are they buying? There were 11,142 Foreign Investment Review Board (FIRB) approvals last year from over 40 countries and 9768 of them were for residential real estate.

Those moving here on Significant Investor Visas are mostly first generation wealth and often have a wider range of risk appetite and investment outlook than those who are carrying second or third generation wealth.

For more information into the Significant Investment Visa please contact Luke Malone, Director of Prosperity’s Asian Business Desk.