There has been much made of the recent investment by foreign buyers into Australian residential real estate.
Some commentators have suggested that this has led to the surge in values of residential real estate-particularly in Sydney and Melbourne-and there have been reports particularly of sales of second hand real estate in breach of the FIRB guidelines.
Australia’s Parliament inquiry report on foreign investment in residential real estate (residential RE) has just been released , and the 148 page report covers the following topics;
- current status on the regulation of foreign investment in residential property
- level of foreign investment in Australia (based on available scant data)
- Impact on house prices and affordability
For a detailed review of the report:
The findings and highlights include:
1. Data on foreign investment in residential RE is poor and needs improvement
2. Existing foreign investment framework (FIF) be retained in its current form, but critical of FIRB leadership
3. Improve audit, compliance and enforcement of FIF
4. A $1500 administrative fee be charged to foreign investors in residential RE
5. A civil penalty regime for FIF breaches to be introduced
6. Criminal penalties to foreign investors on FIF breaches (on residential RE), also apply to service provides who knowingly assists them
7. Any capital gains (after divestment of the illegally purchased property) be retained by the Government.
8. FIF rules to explicitly require a temporary resident to divest an established property within three months if it ceases to be their primary residence.
9. A national register of land title transfers that records the citizenship and residency status of all purchasers of Australian real estate to be established by Fed and State governments
10. An alert system for the expiry of temporary visas be established, so that Treasury can issue property divestment orders in cases of non-compliance
11. Residential property sold under off-the-plan certificates that is marketed for sale overseas, must be marketed in Australia for the same period of time
12. Foreign investor purchases of residential RE be considered as a possible area of investigation for improvements in anti-money laundering and counter-terrorism financing.
13. Government departments make greater use of the databases held by other government entities to improve operations of FIF
It remains to be seen whether these findings and recommendations are implemented and to what extent. Many people within the property industry see the current levels of foreign investment as important to the continued recovery of the housing industry particularly in regional locations outside of Sydney and Melbourne, and not necessarily contributing to pricing increases in all areas.