SYDNEY (Reuters/AFP) - Australia plans to charge fees to foreign nationals buying residential property and fine those who break foreign investment laws, in an attempt to improve housing affordability amid some of the world's highest property prices.
The scheme could raise about A$200 million (S$211 million) a year by charging foreign homebuyers A$5,000 for properties valued under A$1 million and an additional A$10,000 for every additional A$1 million, Treasurer Joe Hockey said on Wednesday. He said a register of foreign nationals buying real estate would be established and those who break the law would face a fine up to a quarter of the value of the property and could be forced to sell.
“Part of the Australian dream is owning your own home and we certainly want the dream to continue,” Prime Minister Abbott told a press conference in Sydney. He said the current rules, under which foreigners are only allowed to buy new dwellings and are barred from purchasing existing residential property, had not been enforced in recent years.
“Under the former (Labor) government, for six years there was not a single legal case against a foreigner buying a home,” he said. “So what we’re on about is ensuring that the long-standing rules are enforced.“Yes, foreign investment has been very, very good for Australia but it’s got to be the right foreign investment... and it can’t disadvantage Australian home buyers,” he added.The government is proposing charging an application fee on all foreign investments, similar to a scheme already operating in New Zealand. The charges are likely to be more modest than those in places such as Hong Kong and Singapore, Mr Abbott said.
Cashed-up foreigners, many from China, have been blamed for driving up prices in Australian property markets, particularly Sydney and Melbourne, and placing home ownership out of reach of many locals.
Australian property has long been a popular choice for Chinese money - both legitimate and illegitimate - but the flow of investment appears to have accelerated.
Australia's foreign investment review board says China was the No. 1 source of foreign capital investment in real estate in 2013, approving nearly A$6 billion of investment, up 41 per cent from a year ago.
Chinese investors are forecast to spend US$20 billion (S$27.2 billion) on offshore property this year, up 21 per cent on 2014 as more domestic real estate developers and insurers internationalise their holdings.
More wealthy Chinese are moving their money out of China to invest in Australia's property market as a corruption crackdown in the world's second-biggest economy gathers momentum, property consultants and lawyers said.
Prime Minister Tony Abbott said the fees and fines will bring Australia into line with other countries like Hong Kong, Singapore and New Zealand, and will enforce a set of rules already in place but never enforced. "The idea is not to deter foreign investment, the idea is to ensure that the rules are enforced," Mr Abbott told reporters.
Australia's two biggest cities Sydney and Melbourne, home to a third of the country's 23.6 million population, rank in the world's six least affordable places to buy a home, according to US urban planning researcher Demographia.
Prices in Sydney rose more than 13 per cent in the year to October, prompting many media reports of foreigners snapping up properties.
A rate cut by the Reserve Bank of Australia earlier this month added to concerns that the country's high residential property prices will continue to rise.
Treasurer Joe Hockey added that foreign ownership of real estate "raises significant issues ranging from national security to potential criminal activity, money laundering and a range of other things".
Real Estate Institute of Australia chief executive Amanda Lynch said the new fees were too high and will not benefit Australians buying properties under A$1 million. She added that the United States and Canada had no comparable fee and Singapore’s was lower.
“(Foreign investors) are not really competing with first home buyers,” she said. “It will help Australian property buyers in Sydney or Melbourne to get property at the higher end of the market, but the rest of the market won’t notice a substantial difference.”
Mr Garo Karamanian, a real estate agent in the popular Sydney Chinese real estate suburb Chatswood, supported the fees and fines, saying they will curb large developers’ ability to inflate prices for off-the-plan sales to foreigners. “It will slow down the market probably but it will stop the developers loading the prices knowing they can just flog them overseas,” he said.Mr Justin Brown, chairman of residential projects at real estate agency giant CBRE Group Inc, said the new fees amounted to taxes, were “counterproductive and ill thought”, and could lead to a market correction.