Australia orders sale of seven properties in crackdown on foreign ownership

A woman walking past signs outside a property that was recently sold in the Sydney suburb of Bondi on Sept 23.
A woman walking past signs outside a property that was recently sold in the Sydney suburb of Bondi on Sept 23.PHOTO: REUTERS

SYDNEY (Reuters) - The Australian government said it ordered the sale of seven residential properties bought in breach of foreign ownership laws, in a response to concerns that offshore buyers are driving up house prices.

Australian capital city homes are considered among the most overpriced in the world, and the Federal Government in March announced new and expanded punishments for foreigners who breach existing rules restricting them to buying new homes only.

Treasurer Scott Morrison said on Wednesday (Nov 18) that the forced sale of seven properties takes to 19 the total number of homes the government has declared were bought illegally by foreigners, mostly Chinese nationals, and ordered sold.

"I expect more divestments will be announced in the future and once again warn foreign investors in residential real estate that they must comply with Australian law," Mr Morrison said in a statement. "Australians for the first time in a long time can be reassured our foreign investment rules are being enforced."

The forced sales are the first since Mr Morrison became Treasurer in a leadership spill in September, and suggest the new conservative government of Prime Minister Malcolm Turnbull will stick to the previous government's strategy of cracking down on foreign property sales to improve affordability.

Many economists are already forecasting a slowdown or possible contraction in the growth of Australian house prices after banks hiked lending rates to boost cash reserves under tough new capital buffering rules.

Mr Morrison said that since the foreign ownership crackdown began in March, the government has investigated 1,044 property sales and has another 532 sales under investigation.

He added that the seven latest mandatory resales included a A$5.2 million (S$5.3 million) house in the city of Melbourne, bought illegally by a Chinese national, as well as three more homes bought by Chinese, two by Hong Kong nationals and one by a German.

The government also blocked the A$4.4 million purchase of a house in Melbourne to an Iranian national because it was"contrary to Australia's national interest", Mr Morrison said.