Temporary residents will be forced to sell any property bought during their stay in Australia, in just one of the new rules to be imposed on the market by the Federal Government to curb a high level of foreign investment.
The statement comes as the residential property market faced a bleak weekend with low volumes due to the Anzac Day holiday.
Assistant Treasurer Nick Sherry announced the changes late last week, also saying new penalties under civil law will apply to real estate agencies in order to enforce the new restrictions.
The Government has been pushed into the reforms by a number of complaints regarding foreign investment in the residential sector, reportedly regarding buyers from Asia. During 2007-09, the FIRB dealt with 4,028 applications from foreign investors attempting to buy property, representing a 35% increase from the 2006-07 year.
Some critics say this level of investment is taking away opportunities for resident buyers to purchase their own homes.
“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,” 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 changes include:
• All temporary residents looking to purchase existing property in Australia must now be brought in with a notification, screening and approval processes through the Foreign Investment Review Board.
• Temporary residents will be subject to the same compulsory notification and screening processes as non-residents, mandating they sell established property when leaving Australia and be required to commence construction on undeveloped land within 24 months or have the land compulsorily sold.
• A new civil penalties scheme that will apply to recapture any capital gain made through the illegal purchase and sale of property.
• A new data matching compliance monitoring program.
• A new 1-800 community hotline to measure compliance by real estate agents.
• New civil penalties for real estate agents going against the new rules. Sherry said these restrictions would “make it easier to secure sanctions”.
• As part of these new civil penalties, the Government will introduce sanctions for purchasers, sellers and agents involved in transactions in breach of the rules.
• Compulsory divestment requirements where property has been purchased in breach of new rules.
“If you are a temporary resident or foreign non-resident investing in Australian real estate, or a real estate agent working in this area, your activities will be proactively monitored with top-of-the-line data-matching and this will be backed up by tough new civil penalties,” Sherry said in a statement.
“If you do the wrong thing, you will be found out.”
But the impact of these new rules may not be known for some time, as property experts have said the exact amount of property owned by foreign investors is still a mystery. SQM Research founder Louis Christopher says the rules are a good idea but it is hard to see what impact foreign buyers were really having on the market.
“It is very difficult to tell, but we don’t know how much these investors were affecting the market in the first place. There was evidence that investors are buying it, but to what degree we don’t know apart from anecdotal evidence.”
Christopher says it is unlikely the changes will impact prices, but any change would be more likely noticed towards the top end of the market.
“I think if there was to be any impact, it would be at the top end because that’s where most of the investors seemed to be putting their money. It’s a wait-and-see approach, but I generally feel that we won’t see too much impact. It’s unknown, however, because we don’t know the extent to which investors were driving the market.”
Meanwhile, the auctions market was quiet on the weekend as buyers paused for Anzac Day. But despite the low results, Real Estate Institute of Victoria chief executive Enzo Raimondo said the sales indicated a strong property market and that listings for the next three weeks are strong.
“Listings for the next three weekends are very high for this time of the year with around 2,400 auctions expected. The high number of listings is a clear sign of confidence from vendors, confidence that judging by the results so far this year is not misplaced. All the market indicators suggest the market will remain solid through autumn and winter.”
Melbourne saw 470 auctions over the weekend, with 389 selling indicating a clearance rate of 83%. Total sales reached $247 million.
In Sydney, the nation’s largest market, a total of 192 properties were put up for auction with 149 selling at a total of $109 million, indicating a clearance rate of 73%.
In Brisbane, only 11 properties sold in a market of 27, with a clearance rate of 37% and total sales worth $6.4 million. In Adelaide, 19 properties were sold with 28 on the market, indicating a clearance rate of 63% and total sales worth $7.7 million.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
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