Australia set to tighten rules for foreign property buyers
Parliamentary committee calls for stronger regulations amid concerns foreign investment, much of it from China, is pricing locals out
An Australian parliamentary committee yesterday recommended strengthening rules on foreign investment in the country's booming housing market, calling enforcement of the current framework "severely lacking".
The committee's review, chaired by ruling Liberal Party lawmaker Kelly O'Dwyer, was commissioned this year amid concerns that local buyers were being squeezed out of the residential property market by foreign investors, particularly cashed-up Chinese.
"We have found that the framework itself is appropriate and strikes the right balance in terms of encouraging beneficial foreign investment in the housing market; however its application is severely lacking," O'Dwyer said.
"I regard the current internal processes at the Treasury and FIRB [Foreign Investment Review Board] as a systems failure."
The inquiry found that current rules on foreign purchases were not being enforced and made 12 recommendations for change, including civil penalties for any breaches.
Penalties would also apply to all third parties who knowingly assist a foreign investor to breach the framework. Any capital gains from the sale of an illegally held property would be seized by the government.
The committee also recommended establishing a national register of land title transfers that would record the citizenship and residency status of all home buyers.
Prices in Sydney rose more than 13 per cent in the year to October, prompting reports of foreigners snapping up properties.
Although the inquiry was not focused on investors from any particular country, wealthy buyers from China have largely been blamed for ramping up home prices in Australia's major cities.
Australian property has long been a popular choice for Chinese money - both legitimate and illegitimate - but the flow of investment has accelerated.
The FIRB received approvals to invest nearly A$6 billion (HK$40 billion) into the sector last year, up 41 per cent on the year. China was the No1 source of foreign capital investment into real estate.
China is expected to see annual growth of 20 per cent in outbound real estate investment in the next decade, up from US$11.5 billion last year, property agent Savills has forecast.
Australia was now the second-most favoured destination for Chinese property buyers, behind the United States but ahead of Canada and Britain, according to Juwai.com, the largest real estate portal that targets Chinese buyers looking abroad.
Clients in Beijing and Shanghai were increasingly seeking existing homes as they heard FIRB rules were not being enforced, said Joseph Zaja, Sydney-based managing director of Ausin Group which offers property and mortgage broking to Chinese buyers. Their friends and family on the mainland "are purchasing second-hand homes with no barriers to entry and they too are now moving onto this bandwagon," Zaja said.
Additional reporting by Agence France-Presse, Bloomberg