Foreign property investors could face fees and fines
Australia is well known to have some of the least affordable property prices in the world, especially Sydney and Melbourne which are becoming increasingly more expensive to live in and purchase property.
Because of this, the Federal Government has made a proposal to start charging foreign investors fees when buying residential property, whilst fine anyone who breaks foreign investment laws.
Foreign home-buyers could be charged $5,000 for properties less than $1 million and $10,000 for every extra $1 million. From doing so, as much as $200 million a year could be raised. Anyone who does break the rules though could face fines of up to a quarter of the property value and could even be forced to sell up.
“We need to make sure that all foreign investors are following the rules, and that those foreign investors who break the rules are not able to profit from breaking the law,” stated Tony Abbott.
Australia has become a popular place for Chinese buyers and investors to buy residential property, with Melbourne home to a large community of Chinese. This year alone, Chinese investors are predicted to spend $20 billion on offshore property, 21 per cent more than in 2014.
In 2013, China was Australia’s top source of foreign capital investment in real estate, where $6 billion of investment was approved.
So, are these fees and fines a good idea for the Australian residential property market? In a way yes. Many home buyers are being forced out of the market and cannot even put together a deposit, let alone find the money for stamp duty costs. By charging foreign investors more in fees, this could help home buyers enter the property market.
There are various other countries that do have rules in place for foreign investors including New Zealand, Singapore and Hong Kong, although the likes of the UK, Canada and USA do not have any application fees for residential property.
These new rules are not meant to deter foreign investment, but to ensure that the rules are followed, and if they are not, then stiff penalties and fines will apply. An extra $30,000 in fees on a $3 million residential property is not that much in the grand scheme of things, and many investors are still likely to pay this amount to buy a multi-million dollar property with panoramic views.
Published on 2nd of March 2015 by Marty Stanowich