After China further relaxed restrictions around investment in overseas markets last week, controversial Chinese investment in Australian property is expected to accelerate, which has the industry divided.Simon Smith, a Hong-Kong based research senior for Savills – a leading global real estate service provider – told the Australian Financial Review that the recent relaxation of restrictions may cause an influx of more foreign investment and is “something to watch”.
Foreign investment is certainly something Liberal MP and chair of the parliamentary inquiry into foreign investment in Australian real estate, Kelly O’Dwyer has her eye on. She recently accused the Foreign Investment Review Board (FIRB) for failing to do their job by not prosecuting foreign investors who bend the rules.
The current regulation states that foreign investors can only invest in new dwellings, which would stimulate more housing supply. Instead, many foreign investors are investing in established dwellings – without permission or prosecution – putting upwards pressure on property prices.
Now, she is calling for foreign investors to face tougher penalties. O’Dwyer told Fairfax Media this week that the inquiry was considering beefing up penalties for foreigners who flout real estate laws, to make them proportional to the value of the property purchased.
"The largest penalty fee that can be imposed is about $85,000. We have been told by many witnesses that that is simply seen as the cost of doing business," she told Fairfax.
The inquiry has delayed handing down its recommendations on foreign investment in real estate. It is now expected to be released in late November.
Meanwhile, a new survey by InfoTrack reveals that property lawyers and conveyancers in New South Wales – which is a hot spot for Chinese investment – are not convinced Chinese buyers are pushing up house prices. According to the survey, 69% of respondents claimed Chinese buyers have had no impact on their region.
Leith van Onselen, economist and writer for Macro Business said the core of the issue isn’t necessarily the amount of foreign investment, but where they are investing.
“The crux of the whole foreign investment issue is that non-resident purchases of pre-existing dwellings are effectively unregulated. Fix the regime governing pre-existing housing – by ensuring accurate data collection and enforcement – and the perceived problem of foreign investment in Australian property will be solved."
