New details have emerged of the near-total inaction of the Foreign Investment Review Board in penalising foreign investors who illegally buy established homes in Australia.
The FIRB has told the chair of a parliament committee inquiring into foreign investment in real estate that is has not asked a single offshore investor to sell off an illegally acquired house since 2008.
The Australian has previously revealed that the FIRB has not conducted a single prosecution since 2006 despite a flood of foreign buying that has seen overseas investors purchase tens of thousands of established homes in Australia.
House economics committee chairwoman Kelly O’Dwyer said the revelation was more evidence of serious deficiencies in the FIRB’s approach to enforcing laws about investment in established homes.
“With respect to residential real estate, the Foreign Investment Review Board has failed in its responsibility of monitoring and ensuring compliance of Australia’s foreign investment framework,’’ she said.
“Not a single compulsory sale of illegally purchased housing since 2008 and an inability to provide data on voluntary sales, it all points to a failure of leadership at FIRB on the issue of foreign investment in residential real estate.”
While Australia allows foreign investment in off-the-plan housing, foreigners are banned from buying established homes in all but a narrow range of circumstances.
The main loophole, which has been exploited ruthlessly by offshore investors and their local facilitators, is a clause allowing temporary residents to buy a home to live in while in Australia.
The rules demand that these investors sell the home within three months of leaving Australia, but the revelation that there have been no forced divestments of properties since 2008 exposes the gaps in the FIRB’s enforcement.
In 2008/9, foreign investors bought 2450 established homes worth $1.81 billion. By 2012/13 that figure had risen to more than 5000 homes to a value of $5.42bn, amid a wave of buying from Chinese investors, some of whom are anxious to park their accumulated wealth out of reach of Chinese authorities.
Earlier this month The Australian revealed that the department of immigration does not share data with the FIRB on when property owners’ visas expire or when they leave the country.
Buyer advocates in areas dominated by Chinese buyers report their presence is adding at least 10 per cent to property prices, as local bidders struggle to compete against the flood of money from China.
Offshore buying brings together the themes of housing affordability, immigration and foreign investment and has thus rapidly become a hot-button issue politically, something MPs are beginning to realise.
The house economics committee is expected to hand down its report later this week. As reported by The Australian, the report is expected to contain a tough new civil compliance regime to target law-breakers with large fines. Foreign investors would also be charged an application fee of up $1500 per successful application under its recommendations.
The report is expected to be heavily critical of the FIRB’s performance under chairman Brian Wilson, a former investment banker who has overseen its ultra light-touch regulation of investment in established housing in Australia.
This article was first published on The Australian Business Review.