Number of foreign investment residential approvals more than doubles as government scrutinises more transactions

The number of foreign investment purchases receiving approval more than doubled last year as a result of the government's increased scrutiny of house buying by temporary residents, according to the Foreign Investment Review Board (FIRB) annual report.

Some 9,770 approvals were given to property acquisitions during 2010-11 year compared with the 3,897 approvals in 2009-10.

The increase is largely attributable to the reintroduction from April 2010 of the screening of temporary residents purchasing residential real estate.

The changes mean that all temporary residents and foreign non-residents seeking to invest in Australian real estate have been brought within the notification, screening and approval process.

Approved proposed residential investment totalled $41.5 billion in 2010-11, compared with $20 billion in 2009-10, a big jump because of the different approval requirements. More than 80% of the approvals involved property costing less than $1 million.

Chinese buyers dominated the list, with some 5,000 approvals which were mostly residential, along with some agricultural and mining acquisitions. Next on the list was the United Kingdom (1000), followed by Malaysia (896), then Singapore (536), South Africa (347) and India (320).

Across all sectors the United States was the largest source of proposed foreign investment in Australia, but mostly in the services industry and manufacturing.

The mineral exploration and mining development sector remained the largest industry sector by value of approvals, albeit with just 222 approvals.

Victoria’s residential approvals totalled 4,400, with NSW the next busiest sale for approvals at 2,600, then Queensland with 1,270 acquisitions, and WA with 812 acquisitions, South Australia with 432, the ACT's 129 and Tasmania on 44 and the NT with 16 acquisitions.

Real estate purchases made up around a quarter of the total $177 billion invested nationally during the last financial year, with real estate investments worth $41.5 billion approved in 2010-11.

The annual report suggests there might be an overstatement when it comes to off-the-plan approvals as the approved developers may fall short in the likely extent of actual foreign purchases. The value of investment reported against annual program approvals represents the maximum amount foreign persons may acquire under the program.

The report notes the year has been characterised by continued media and community interest in foreign investment, notably in agricultural land and businesses.

“This area has also been the subject of a number of parliamentary inquiries and hearings and proposals for legislative change.

“The board has closely monitored the policy issues in this area,” it notes.

But while a heated debate rages about foreign investors buying farms and agricultural assets, the latest report shows foreigners are actually more likely to be buying houses, off-the-plan units and commercial property.

And in 2010-11, just 43 proposals – and 42 were property proposals – were rejected.

About half the real estate purchases came with conditions which included the time during which development must commence, and also requiring temporary residents to reside in and then sell established dwellings when they cease to reside in them.

The new tightened approval and selling requirements came in April 2010 after television and the print tabloid media, especially reporting on Melbourne’s auction scene, had numerous stories about Australians being outbid by Chinese buyers.

The government tightened foreign investment rules relating to residential property even setting up a little-utilised 1800 hotline for locals to report suspicious property buyers.

The then assistant treasurer Senator Nick Sherry said at the time: “The Rudd government is acting to make sure that investment in Australian real estate by temporary residents and foreign non-residents, is within the law, meets community expectations and doesn’t place pressure on housing availability for Australians.”

Brian Wilson has been appointed as chair of the Foreign Investment Review Board for a five-year period, succeeding John Phillips, who retired after having served 15 years on the board earlier this month.