Foreign investors who have purchased property illegally in Australia will have until the end of November to come forward to avoid criminal charges and severe fines.
This is the latest policy proposal by Prime Minister Tony Abbott’s government’s tough new laws to combat the nation’s housing affordability crisis, which has been partially caused by foreign investors who have inflated housing costs and priced out local buyers.
“Foreign investment is integral to Australia’s economy and we welcome all investment that is not contrary to our national interest,” said the Prime Minister’s office in a statement.
“We will enforce the rules, ensuring that all foreign investors follow the rules and don’t profit from breaking them.”
The crackdown calls for fines of CAD$121,000 and up to three years jail for individuals found breaking the rules. Companies will face higher fines of CAD$605,000.
Third parties, such as real estate agents, who assist foreigners in breaching the laws could be fined up to CAD$40,400 for individuals and CAD$202,000 for companies.
There are even penalties to ensure foreigners do not profit from any forced sale. Foreigners will face a 10 per cent penalty of the transaction price while temporary residents will face fines of 25 per cent.
In addition to the new penalties, Australian taxpayers will no longer be responsible for the cost of screening foreign investment applications as the cost will instead be levied through new fees on applications.
Residential properties valued at AUS$1 million or less will include an AUS$5,000 fee. Higher fees will apply for more expensive residential, commercial and agricultural properties – an extra AUS$10,000 for every AUS$1 million increase in the value of the property.
Australia has previously encouraged foreign investment to increase its new housing stock, provided that foreign buyers receive government approval on the transaction. It generally does not permit foreigners to purchase real estate from the existing supply.
Temporary residents are permitted to buy a single home to live in, but they must sell the property when it is no longer occupied. Both temporary residents and foreigners can also buy existing property for redevelopment, as long as construction begins within two years after the transaction is made.
“Australia’s foreign investment policy for residential real estate is designed to increase Australia’s housing stock, but lack of enforcement over recent years has threatened the integrity of the framework.”
The ultimatum came just days after a new report by the nation’s Foreign Investment Review Board found that foreign spending on existing residential real estate jumped from AUS$2 billion to AUS$7.17 billion over the course of a year. This is an unusually high jump that has government and industry insiders speculating the increase could be partly driven by illegal transactions.
China has also outpaced the United States in becoming Australia’s most significant source of foreign investment, spending more than AUS$12 billion during the 2013-14 fiscal year. In contrast, Chinese investment on the nation’s real estate in 2012-2013 was just AUS$5.9 billion.
According to a recent survey on housing affordability by Demographia, Australia’s two major cities are amongst some of the world’s least affordable major metropolitan markets. Vancouver is ranked second place, just behind Hong Kong, but comes ahead of Sydney (#3) and Melbourne (#6).
1. Hong Kong, China – 17.0 ($762,437 median price; $44,730 median household income)
2. Vancouver, Canada – 10.6 ($704,800 median price; $66,400 median household income)
3. Sydney, Australia – 9.8 ($812,000 median price; $82,800 median household income)
4. San Jose, U.S.A. – 9.2 ($860,000 median price; $93,400 median household income)
5. San Francisco, U.S.A. – 9.2 ($744,400 median price; $81,200 median household income)
6. Melbourne, Australia – 8.7 ($658,000 median price; $75,900 median household income)
7. London, U.K. – 8.5 ($706,400 median price; $84,222 median household income)
8. San Diego, U.S.A. – 8.3 ($517,800 median price; $62,700 median household income)
9. Auckland, New Zealand – 8.2 ($613,000 median price; $75,100 median household income)
10. Los Angeles, U.S.A. – 8.0 ($481,900 median price; $60,000 median household income)