Higher penalties for overseas buyers

Foreign-investment-has-helped-build-housing-supply-_157_6011563_0_14092550_300Recent weeks have seen foreign investment as the main point of discussion – and debate will continue to rage after the federal government’s latest announcement. Treasurer Joe Hockey and Prime Minister Tony Abbott have released their plans to crack down on illegal activity in the Australian property market, slapping overseas buyers with higher fees and stricter penalties.

The release of the government’s Options Paper earlier in the year set the scene for these latest developments, though the response has been mixed. In a joint May 2 release, Mr Hockey and Mr Abbott pointed out that foreign buyers will continue to play an important role, but their purchases need to be made in line with what’s best for the national economy – and that means a tighter approach to regulation.

The policy changes include substantially higher fines for non-compliant buyers and any third-party that assists them in making an illegal purchase, as well as the introduction of civil penalties. In some cases, these could reach as high as $127,500 or three years imprisonment for individuals, $637,500 for companies.

Similarly, the government has introduced a fee on foreign investment proposals for residential property. This includes a $5,000 application fee for homes prices at $1 million or less, and even steeper charges for commercial and agricultural land.

The decision has received both praise and criticism from the housing sector. The Property Council of Australia applauded the government for taking a stance against unscrupulous offshore investors, who have been blamed for pushing local buyers out of the property picture.

“We welcome the Government’s decision to lower proposed fees on greenfield development but are very disappointed it continues to want to overcharge for individual, commercial and off-the-plan purchases,” Chief Executive Ken Morrison said in a 4 May release.

“However, the Government is undermining its own aim of making homes more affordable by simultaneously penalising legitimate foreign investment in new housing.”

This is certainly something to keep a close eye on. Foreign investors have a particular taste for Australian property, so it will be interesting to see what impact the fees have on their appetite in the long-term.

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