New curbs on foreign home buyers
By Matthew Franklin
The Australian, April 24, 2010
Complaints about foreigners driving up Australian house prices have forced the Rudd government to reinstate a rule it scrapped in 2008 requiring temporary residents to sell their houses when they leave the country.
The government will also match travel details with ownership data to ensure people who violate the laws are caught, and will create new penalties under civil law that will also apply to real estate agents. The new regime will include provisions allowing the government to force those leaving Australia to sell their properties and to claw back any capital gains made by foreign investors who breach the arrangements.
There have been several complaints in recent months about foreign investment in the residential sector, mainly focused on Asian investors outbidding locals at auctions to buy homes for their children studying in Australia.
In 2008, the government lifted provisions putting temporary residents buying property under the same Foreign Investment Review Board scrutiny as foreign residents.
This meant their property investments did not have to be screened or approved by the FIRB and they could retain ownership after leaving Australia.
But last night Assistant Treasurer Nick Sherry issued a statement saying he would reimpose the old conditions and create new measures to further tighten the system and improve compliance.
'The Rudd government is acting to make sure that investment in Australian real estate by temporary residents and foreign non-residents is within the law, meets community expectations and doesn't place pressure on housing availability for Australians,' Senator Sherry said.
'The new provisions announced today will mean that anyone trying to flout Australia's strict foreign investment rules will face tough new penalties that will be fully enforced.' The new penalties regime is still being developed, but is expected to include fines big enough to act as a deterrent.
In 2007-08, the last year in which the restrictions were in place, the FIRB dealt with 4028 applications for foreigners buying Australian property – up 35 per cent from the previous year.
The government does not know how many houses have been bought by foreigners in recent years, but there have been reports of growing tension among home buyers concerned about prices being driven up by an increase in the purchases.
Senator Sherry conceded the rules were not tough enough and he worried that some real estate agents were taking advantage of their weakness.
He said international investment that boosted the supply of housing was 'a good thing' but had to be subject to strict conditions.
'The reimposition of compulsory notification, screening and approval at the front end and the forced sale of properties when temporary residents leave Australia will ensure that investment is in Australia's interests and in line with community expectations.
'These changes will also be strictly applied to temporary residents who are here on foreign student visas.'
Senator Sherry said he would develop a civil penalties regime to back the changes including a special penalty to recapture any capital gain made through the illegal purchase and sale of properties, and penalties for purchasers, sellers and real estate agents.
The government would also create a data-matching arrangement using the resources of the FIRB, state agencies that deal with property transactions, and immigration officials and establish a telephone hotline for people to report suspicions of illegal activity.
'The relationship between FIRB and the Director of Public Prosecutions will also be significantly enhanced with both agencies commencing work on a detailed memorandum of understanding focused on securing improved enforcement outcomes,' Senator Sherry said.
'I want to make sure that all arms of the Australian government are working optimally together to secure prosecutions where breaches occur.'
Senator Sherry said he had also written to states asking them to work with the real estate industry to develop agreements to bolster co-operation and compliance.
Hammer falls on foreign investors
By Marika Dobbin and Jonathan Chancellor
The Sydney Morning Herald, April 24, 2010