ST : Australia tightens rules for foreign property buyers

Apr 25, 2010

Australia tightens rules for foreign property buyers

Sydney - Australia clamped down on foreigners buying property yesterday, after complaints that a rapid influx of Asian money had helped make its housing among the most expensive in the world.

The government reimposed tough rules relaxed in 2008 that say temporary residents need permission to buy homes and must sell when they leave the country, while foreigners investing from abroad can buy only new properties.

The rules are backed by stiff new penalties including compulsory sell orders, as well as expanded monitoring and a crackdown on real estate agents who help foreigners flout the rules.

They follow growing disquiet that ordinary Australians are being priced out of the market after a decade-long property boom that has accelerated over the past year.

'We want to make sure that Australian working families are not being priced out of their own family homes. That is why we have acted in the way in which we have done,' said Prime Minister Kevin Rudd.

'We want to make sure that foreign speculators are not going to force up prices for Australians seeking to buy their own home, buy their first home and we think this is the right course of action.'

Property experts in Singapore say that the rules for temporary residents will affect the market Down Under.

Mrs Doris Tan, managing director of Singapore's DST International Property Services, said that, with new rules in place, investors might turn to other places like London since the pound sterling is weak.

'This new ruling will definitely result in a drop of property prices in Australia,' she said.

House prices have been red-hot in Australia's major cities, especially Sydney and Melbourne and also Perth, centre of the country's booming minerals exports to Asia.

Victoria state, whose capital is Melbourne, smashed the billion-dollar weekly sales barrier in March, while Rupert Murdoch's son Lachlan landed a record US$23 million (S$31.5 million) property at a Sydney auction in November.

An international survey released in January found Australia's housing was the least affordable among six advanced nations including the United States, Britain, Canada, New Zealand and Ireland.

The Australian Treasury has been reportedly investigating 50 cases of suspicious residential property purchases by foreigners in Melbourne, contributing to rising property prices.

Under reinstated regulations, temporary residents and foreign students will be screened to determine if they will be allowed to purchase a property.

Foreign residents without temporary visas cannot buy existing houses, and may buy property only if it adds to the housing stock. If buying land, they must build within two years or sell it to stop 'land banking'.

Travel details and ownership data will be matched to catch cheats, and the public will have a new hotline to report foreigners they suspect of breaches.

Those leaving Australia must sell their properties and the government will claw back any capital gains made by foreign investors who breach the arrangements. Real estate agents will face new penalties under civil law.

This rule, DST's Mrs Tan said, would have a great impact on people whose children study in Australia. 'Asian parents will still buy the property for their children, to have a home away from home. Parents will now treat the money as money spent on rent and they must be prepared to sell when their children leave the country,' she said.

Australia's opposition has said foreign investors are outbidding locals at house auctions, while media reports refer to cashed-up Asian buyers snapping up homes for their children studying in the country.

However experts also blame a lack of housing supply and say government handouts, including grants for first-time buyers, have inflated prices.

AFP, Xinhua

Additional reporting by Debbie Kwong