New rules for foreigners to cool Aussie property scene
AUSTRALIA plans to charge foreign nationals fees for buying residential property, and fine those who break foreign investment laws in an attempt to cool one of the world's hottest property markets, but experts doubt it will make housing more affordable.
Treasurer Joe Hockey said on Tuesday that he hopes to raise about A$200 million (S$214 million) a year by charging foreign home buyers A$5,000 for properties valued under A$1 million and another A$10,000 for every additional A$1 million.
The government will also set up a register of foreign nationals buying real estate and fine those who break the law up to a quarter of the value of the property and force them to sell, Mr Hockey added.
While he did not specify any nationality being targeted, the new rules come as Australia experiences a rapid influx of Chinese money - both legitimate and illegitimate - into its property market.
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.
The country's two biggest cities - Sydney and Melbourne, home to a third of the country's 23.6 million population - rank third and sixth in the world's least affordable places to buy a home, according to United States urban planning researcher Demographia.
Home prices in Sydney rose more than 13 per cent in the year to October, prompting media reports of foreigners snapping up properties. Regulators have also called for banks to limit riskier loans and there have been calls for tax loopholes which benefit investment properties to be closed.
"We don't have a major concern that foreign investors are major contributors to affordability (problems), but perceptions out there are created when there is a lack of data and information about what's actually happening," said RP Data executive general manager Craig McKenzie.
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 said the US 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."
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 probably slow down the market, but it will stop the developers loading the prices knowing they can just flog them overseas," he said.
Justin Brown, chairman of residential projects at real-estate agency giant CBRE Group, said the new fees amounted to taxes, were "counterproductive and ill thought", and could lead to a market correction.