The Australian government ordered the sale of a Sydney waterfront mansion it alleges was illegally bought by Chinese investors last year, opening a new frontline in its battle to curb the flow of foreign money contributing to rising home prices.
Treasurer Joe Hockey gave a unit of Hong Kong-listed Evergrande Real Estate Group up to 90 days to find a buyer for the house, located in the affluent suburb of Point Piper, that it bought for $39 million in November. He said Evergrande's Australian unit -- Golden Fast Foods -- failed to meet regulatory requirements that govern foreign investment in Australia's property market.
In a statement, Evergrande said it had tapped a local law firm to be in charge during the buying process.
"The company will fully cooperate with the arrangements of Australian authorities to make sure it is in legal compliance," Ke Peng, Evergrande's vice president, said.
Australia has become one of the hottest real estate markets in the world, fueled in part by an influx of foreign money that has driven home prices in many cities beyond the reach of many Australians. Stories of foreigners snapping up harbour-front homes in Sydney, in particular, have become common in Australia, resembling earlier controversies over Russian oligarchs buying property in London and New York.
Wealthy Asian buyers are said by real estate agents to be willing to pay a third or more than domestic buyers for property they are interested in. Last year saw Chinese investment in Australian real estate climb to a record, helping propel a 14.3 per cent rise in Sydney house prices and leading to pressure on Prime Minister Tony Abbott's government to better enforce investment rules.
Last week, the government said it would make it harder for foreigners to buy residential property in the country, raising fees and imposing heavy fines on those who flout the rules. Current rules only allow foreign investors to buy real estate in development and exclude them from acquiring houses already built.
According to the new proposals, non-Australians buying established property would also have to pay an application fee of $5,000 if it is worth less than $1m, and $10,000 for every extra $1m in the purchase price -- as well as requiring special approval from Australia's foreign investment watchdog.
The drive to enforce rules around foreign investment in real estate comes as Mr Abbott battles to shore up support with voters after months of poor polling, having narrowly survived a recent attempt to unseat him from within his own party.
"Golden Fast Foods is a foreign-owned company which failed to notify the foreign investment review board of its intended purchase," Mr Hockey said. "We welcome all foreign investment that is not contrary to our national interest."
The property, known as Villa del Mare, is one of Sydney's best-known luxury homes. Its more than 1,500-square-metre footprint includes an infinity pool and gardens with sweeping views across to the Sydney Opera House and Harbour Bridge. Built in a Mediterranean-style, the property contains five large bedrooms and a separate apartment.
Ken Jacobs, the real estate agent who managed the sale of the mansion, said he was surprised by Mr Hockey's decision.
"It was purchased by an Australian company, a company that is registered in Australia," Mr Jacobs, who works for realtor LJ Hooker in the Sydney suburb of Double Bay, said. "That company was set up by a major accountancy firm and it warranted that they didn't need Foreign Investment Review Board approval."
FIRB, the foreign investment watchdog, wasn't available for comment.
Guangzhou-based Evergrande owns assets ranging from Chinese real estate to a controlling stake in a Hong Kong-based magazine publisher and a successful mainland soccer team.
Richard Simeon, who runs Simeon Manners, a boutique real estate firm that has sold more than $100m in property to Asian buyers in recent years, said the government's decision to challenge the Evergrande unit's deal isn't likely to undermine foreign demand for Australian property.
"Asian buyers are meticulous in the fact that they have to comply. This doesn't scare off the 99.9 per cent of purchasers who are looking to do the right thing," Mr Simeon said.
It isn't the first time that Mr Abbott's government has cited national interest grounds scuttling deals involving foreign investors.
In 2013, Mr Hockey stopped a $3 billion bid by US agribusiness giant Archer Daniels Midland for local grain handler GrainCorp -- a move that raised concern over the conservative government's openness to foreign investment as it seeks to turn the country into a food bowl for Asia.