Australia on Saturday tightened investment rules for foreign real estate investors after concerns were raised that a large inflow of money had pushed property rates among one of the highest in the world.
Under the new rule, temporary residents would be required to be screened and get permission from Foreign Investment Review Board to buy a property, sell their property when they leave Australia and build on vacant land within 24 months or sell, The Age reported today.
The report said there were anecdotal claims of foreign investors ‘stockpiling’ Australian houses and leaving them idle, and of outbidding young people at auctions.
Treasury is investigating 50 suspicious cases in Melbourne, with those caught facing fines and jail.
Prime Minister Kevin Rudd said the changes would make it easier for Australians to get into the real estate market.
“We want to make sure that Australian working families are not being priced out of their own family homes,” he said.
“We want to make sure that foreign investors are not going to force up prices for Australians seeking to buy their own home, buy their first home, and we think that’s the right course of action,” he said.
The tough rules were relaxed in 2008 and have been re-imposed after a growing clamour.
The laws will be backed by new punitive measures, including making it easier to fine vendors in real estate who help foreigners bypass rules.
It will also make it easier to confiscate capital gains, and ensure an expanded data—matching to improve monitoring and increased enforcement, besides a free hotline for people with suspicions.
Federal Assistant Treasurer Nick Sherry said that while he was concerned about ‘stockpiling’, he did not believe it had had a major impact on house prices.
He said the tougher rules were brought in because the compliance regime was too weak and Australia had a strong economy that was attractive to foreign investors.
“I don’t accept that overseas purchases has, in itself, been a major factor. It may have been a contributing factor...
There is a considerable range of other factors that impact on housing prices — land shortages and the underlying strength of the Australian economy,” he said.
House prices have skyrocketed in major cities, particularly Sydney, Melbourne and Perth. A survey recently found Australia’s housing was the least affordable among the U.S, U.K, Canada, New Zealand and Ireland.
