The good old days of buying a house in Australia without much fuss is far and gone to foreign investors. Earlier this May, Prime Minister Tony Abbott ordered the crackdown of foreign property buyers in Australia, as well as unveiled fees to be imposed on the new real estate acquisition and tough new civil and criminal penalties for investors who deliberately break the rules.
The proposal to introduce a new administration fee of $1,500 for foreign buyers came from the Parliamentary Budget Office and is expected to be enforced starting July 1 this year. The new fee is estimated to raise $50 million for the Australian government every year and $600 million over the next decade. It will be used to fund the crackdown on investors who purchased established homes rather new ones (as what's mandated on the FIRB's regulations).
Under the crackdown, new and toughen penalties face those who are found to violate the law. These include a 3-year jail time and fines of $127,000 for individuals and $637,500 for companies.
They will apply to foreign buyers and real estate agents who facilitate the illegal sales of Australian properties.
Why the crackdown?
Under the FIRB rules, foreign property buyers are not really allowed to buy existing residential properties unless approved by the Board on the basis that it will drive housing stock. However, there has been a growing concern that the rules have been deliberately violated, with foreign buyers driving prices up and pricing the locals out of the heated property markets, such as Sydney, Brisbane and Melbourne as well as the rising Gold Coast real estate market.
Abbott hopes to address this concern through the new regulations. “We want to ensure that locals are getting a fair go, that the playing field is at least level and, if possible, slightly tilted towards the locals,” he said.
Foreign investors who have violated the law will have until November 30 to come forward without penalty. However, they will be forced to divest their properties.
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