Australia vows to jail foreigners who buy property illegally

Foreign investors who illegally buy houses in Australia and agents that enable them face hefty fines and prison terms of up to three years under new penalties aimed at cooling soaring property prices.

The new and expanded punishments come in the wake of rising foreign investment in Australian real estate and widespread evidence of abuse of current laws that prevent foreign buyers from purchasing existing homes.

Sentences may stretch to three years and fines to A$637,500 (HK$3.9 million) for illicit buyers, with penalties also on third parties knowingly complicit in violations, Prime Minister Tony Abbott said. The steps were needed to give the public confidence that foreign-investment rules on property purchases were being enforced, he said.

The penalties will tighten scrutiny on overseas buyers at a time when record-low interest rates are driving up Sydney property prices five times faster than wages. A company owned by Chinese billionaire Hui Ka-yan's Evergrande Real Estate Group - which illegally bought a A$39 million mansion overlooking Sydney Harbour - had sold the site to an Australian citizen, Treasurer Joe Hockey said on Friday.

"What we want to do is ensure that illegal foreign investment is not unnecessarily driving up prices," Abbott said. "If you don't play by the rules there will be a tough penalty regime in place, and those penalties will be enforced."

Overseas buyers are only allowed to purchase newly built homes in Australia and need the permission of the Foreign Investment Review Board. Approved overseas purchases of Australian homes more than doubled to A$34.7 billion in the year ended last June, with China overtaking the US as the biggest source of capital, the board said in its annual report last Thursday.