We’ve seen a lot going on of late with changes to foreign investment property laws. There has been ongoing support from industry leading bodies, but these changes have worried some developers that are heavily dependent on overseas buyers. An inquiry by Liberal MP Kelly O’Dwyer recommended an application fee of up to $1500 for foreign buyers wishing to purchase property in Australia. This money will be used to boost the Foreign Investment Review Board’s currently fairly inadequate enforcement of laws banning foreign investors from buying established homes.
The Property Council of Australia said it supported “a robust and well-enforced compliance framework that continues to encourage foreign investment.” Residential executive director Nick Proud said that “The government has an excellent opportunity to ensure that we end up with a much better data set and understanding of the exact level of foreign property ownership property.”
Chief executive of Real Estate Institute of Australia, Amanda Lynch, welcomed Tony Abbot’s claims that he would instigate changes, saying “It beggars belief that not a single enforcement order has been issued since 2006. Either every single foreign investor is doing the right thing or FIRB has been caught asleep at the wheel.’’
This anticipated change has come at the time when there have been some concerns about housing affordability in Melbourne and Sydney, and the role of unpoliced foreign investment in driving prices up. While this may be a solution, it’s suggested that the proposed $1500 fee may serve to deter buyers just when the RBA and the Australian government are trying to stimulate construction. “The proposed $1500 fee really could cut foreign investment in Australia,” Andrew Taylor said. “Other markets that have proposed fees and taxes on foreign buyers have done so with the explicit goal of discouraging foreign investment, so it’s no wonder that this fee could do the same.’’
The head of developer Meriton, Harry Triguboff, whose developments attract large numbers of legal foreign buyers said the changes were “quite unnecessary and very silly. I don’t know of any other country with this attitude of trying to catch people out. By all means catch them, but don’t talk about it and (offend) those doing the right thing.”
The government led committee has recommended a data-matching program between¬ immigration and invest¬ment authorities, and has recommended fines that would be applied to real estate agents, accountants, lawyers and conveyancers who knowingly assisted with illegal purchases. So what does this mean for you as investors?
Well, the proposed $1500 fee is just that: a suggestion for curbing foreign investment and it’s by no means something that has come into practice. If you’re looking to get ahead with property investment, I have this advice for you:
- Exercise some caution when you’re looking at buying new property and when you’re looking into markets that are overly driven by foreign buyers.
- Ignore the hype: A lot of properties are being ‘dressed up’ for the sale, but you need to be able to look past the hired furniture and the lick of paint and see the long term issues, if any.
- Research the market and invest in areas where new infrastructure is planned to be taking place. This is what is going to be adding value to your property.
- Don’t fall for the property that is cheaper just because it’s in a less desirable location (like next to a busy road). It will experience growth but won’t perform as well as something else which may only be slightly more expensive. Consider your long term prospects.
- Buy a property that is attractive to tenants. Things like balconies, sunny backyards and nice alfresco areas are all appealing additions to a potential investment property.
- Do your homework! You need to research properly in order to get the results you want.
- conduct your due diligence, and investigate comparable sale results and the sale history of the property. You also need to conduct building and pest inspection reports and take a look at things like any locational attributes, street appeal and floor plan. Also consider the orientation, outlook, future surrounding development, town plans and zoning precincts