Mixed reactions to federal foreign buyer inquiry recommendations

Reactions to the federal Parliament’s report into foreign investment in real estate have been mixed with some welcoming its recommendations and others claiming it has missed an opportunity to improve housing affordability.

The report by the House of Representatives Standing Committee on Economics made 12 recommendations centred on better enforcing existing regulations, increasing the penalties for non-compliance and improving access to data on foreign investment.

The Property Council of Australia, the Housing Industry Association and The Urban Development Institute of Australia agreed the recommendations would support housing activity in Australia, boosting the economy and adding to the supply of homes.

“We welcome foreign investment in residential real estate as it provides up to 35% of a new development,” Nick Proud, executive director of the Residential Development Council at the PCA said.

HIA chief executive, industry policy and media Graham Wolfe said foreign investment through pre-sales in multi-unit developments could be crucial to ensuring projects came to market.

“[This] obviously benefits potential domestic buyers as well as renters, through more choice and competition,” he said.

But buyers’ agent Patrick Bright, director of EPS Property Search, said he was disappointed that stronger action had not been taken to curb foreign investment which he said was putting upward pressure on property prices.

“To be frank I am shocked that the government is going to continue to put the desires of wealthy foreigners ahead of its own citizens and ahead of the best long-term interests of the country. The government is also clearly putting the interests of developers ahead of every day Australians,” he said.

Bright’s concerns echo views put forward in private submissions to the inquiry. For example, Jennifer Jaeger said in a submission: “I do not believe that continued overseas investment in Australian residential real estate provides ongoing benefits to Australian residents who are finding themselves “priced out” of purchase and rental booms.”

A submission from First National Real Estate noted that property prices in suburbs that attracted Asian investors had risen more quickly than prices in neighbouring areas that were less attractive to foreign buyers. It gave the examples of Carlingford compared with North Rocks, Coogee versus Randwick and Marrickville compared with Arncliffe/Rockdale in Sydney.

Under existing legislation, foreign nationals can only buy newly constructed dwellings and are prohibited from buying established homes. Temporary residents can buy one established dwelling as their residence but they must sell within three months of leaving the country.

However, the report noted some foreign buyers may be breaking the rules. It was highly critical of the Foreign Investment Review Board’s collection of data and enforcement of existing regulations, saying there had been a “significant failure of leadership at FIRB”. It recommended a number of changes to strengthen enforcement and toughen penalties for non-compliance.

UDIA National President Cameron Shephard said foreign investors that weren’t complying with the rules gave a bad name to those that did the right thing.

“Any changes to the administration of the rules, such as the introduction of an application fee, will have to be very carefully considered, so that they do not unnecessarily deter law abiding investors,” he said.

Nyko Property estate agent Bill Nikolouzakis said the $1,500 fee that was recommended by the report, and estimated to generate revenue of $158.7 million over four years, would be too small to deter foreign buyers and could be put towards better resourcing the FIRB.

“This would continue to allow us to attract foreign investors … while giving FIRB the resources to ensure they are identifying and penalising foreign investors who contravene the law,” Nikolouzakis said.

“Putting a process in place to help identify the foreign investors doing the wrong thing and the individuals helping them is the key. Further, the penalty must be enough of a deterrent to make an effect. If no one is being caught or the deterrent is not sufficient, it will not have the desired outcome,” he said.