The government will investigate all realistic evidence of illegal foreign purchases of real estate and is receiving scores of tipoffs from around the country, Joe Hockey has said.
A day after the government ordered the Hong Kong property developer and billionaire Xu Jiayin to sell a $39m Sydney harbourside mansion – allegedly illegally acquired through an Australian front company – the treasurer said he was receiving information about other improperly acquired homes in cities other than Sydney and in lower price ranges.
Xu has 90 days to sell the palatial home, or risk prosecution.
Hockey said he did not want to “create an atmosphere of xenophobia” but he wanted “any Australian who goes to an auction to know they are competing on a level playing field”. He said other investigations into allegedly illegal purchases were under way.
Last week Tony Abbott announced plans for a new tax on foreign property investors and a new penalty regime for anyone flouting the existing rules. He said the government would rigorously enforce existing rules. The new approach was needed to protect the “Australian dream” of owning a home, he said.
Foreigners are precluded from buying existing homes, except if they are temporary residents, and then they may buy an existing home to live in but must sell it when they depart the country. Foreigners may buy new residential homes and apartments.
The Property Council of Australia backed the government’s crackdown on illegal purchases of existing homes, but said the new fees for those buying new homes were too high and would hurt the market.
The council’s chief executive, Ken Morrison, said: “We are concerned that new fees will impact new housing construction – particularly at the affordable range – if much-needed foreign buyers leave these markets.” Housing construction is a bright spot in Australia’s sluggish economy.
A parliamentary inquiry – set up to assess mounting public concern that foreign investors were contributing to spiralling house prices in capital cities – found in its report in 2014 that foreign investment was “not causing market distortions”.
The report found: “The committee is … satisfied from the evidence received that foreign investment is not causing the market distortions that have been advocated in some quarters, particularly for first home buyers. This is because foreign investment levels are not large enough to do so overall and because overseas buyers mainly operate at a different price bracket from first home buyers and buy different types of properties.”
But it did advise the government to better enforce the existing ban on purchases of existing homes.
The report said: “During the course of the inquiry, it came to light that no court action has been taken by FIRB [the Foreign Investment Review Board] since 2006. During the entire Rudd-Gillard-Rudd government, not one divestment order was issued, which means not one government sale of illegally acquired property was made. This compares with 17 divestment orders between 2003 to 2007 when foreign investment in residential real estate was at much lower levels … It defies belief that there has been universal compliance with the foreign investment framework outlined above since 2007.”
