Con­trol on for­eign in­vest­ment

The Weekend Post - Real Estate - - Front Page - AN­DREW WIN­TER

FOR­EIGN residential prop­erty own­er­ship has hit the head­lines yet again.

This is noth­ing new and usu­ally her­alds peo­ple look­ing to lay blame in a boom­ing mar­ket.

We love to blame. Surely it has to be some­one’s fault and cashed-up over­seas pur­chasers seem to be as good a place to start as any. Or are they?

I be­lieve be­fore we ap­por­tion any blame, we need to clar­ify ex­actly who are ‘for­eign buy­ers’. This should ac­tu­ally be rather easy as the nice chaps in the hal­lowed halls of gov­ern­ment have a whole depart­ment ded­i­cated to this par­tic­u­lar topic – the For­eign In­vest­ment Re­view Board (FIRB).

They have rules and reg­u­la­tions that re­late to how we as a na­tion per­mit nonci­t­i­zens, non­res­i­dents, tem­po­rary res­i­dents, hol­i­day­ing types and busi­nesses to pur­chase dwellings.

Firstly, do we re­ally need to con­trol at all, what is prin­ci­pally sup­pos­edly a free mar­ket? Per­son­ally I think we do, Aus­tralia has an en­vi­able es­tab­lished hous­ing mar­ket, de­spite our pop­u­la­tion and ge­og­ra­phy.

Our ti­tle reg­is­tra­tion, our le­gal pro­cesses, our de­fined prop­erty bound­aries, our longterm cap­i­tal growth history, along with the strong rental mar­ket, are all signs of a grownup real es­tate mar­ket.

Nu­mer­ous other na­tions near and far sim­ply do not have such sys­tems in place, or have the econ­omy or cur­rency that dis­plays the air of as­sur­ance/ low risk that has us viewed as a safe haven.

Or per­haps their own hous­ing mar­ket is within the emerg­ing cat­e­gory, where the pri­vate hous­ing sec­tor is still very much in its in­fancy.

With­out any con­trols what­so­ever, it re­ally could cause the gen­eral hous­ing mar­ket some se­ri­ous is­sues.

Typ­i­cally an over­seas buyer rep­re­sents the more wealthy de­mo­graphic from what­ever na­tion, which can in­crease de­mand to a point where prices got squeezed up un­sus­tain­ably.

How­ever, we don’t need to ban the prac­tice, which leads to the most rel­e­vant topic.

If we do need to con­trol for­eign in­vest­ment, how can we do it?

As I’m writ­ing this I’m re­al­is­ing I’m en­ter­ing po­ten­tially dan­ger­ous po­lit­i­cal ter­ri­tory. As such, I will tread wisely.

We al­ready have con­trols and guide­lines such as the “buy new” rule, plus per­mis­sion and ap­proval re­quired for new res­i­dents/visi­tors/hol­i­day­mak­ers to make a pur­chase.

In light of re­cent news sto­ries of mul­ti­ple pur­chases, homes ly­ing va­cant for years and oth­ers pos­si­bly be­ing used as noth­ing more than ve­hi­cles for money laun­der­ing, it does seem that even if the con­trols are there, they are not be­ing mon­i­tored fully. I have per­sonal ex­pe­ri­ence of this.

As new mi­grants here 10 years ago and then only clas­si­fied as tem­po­rary res­i­dents, we were told that our visa would only per­mit pur­chas­ing brand new hous­ing stock, yet af­ter a few months of re­search and ask­ing ques­tions I dis­cov­ered that a po­lite let­ter to FIRB could re­lax the rule.

I do not pre­tend to know the an­swers to this dilemma; we do need con­trols that are both fair and strictly ad­hered to.

I also be­lieve we should not ac­cept any abuse of the sys­tem and en­sure that if an over­seas buyer wants to en­ter our hous­ing mar­ket for noth­ing more than fi­nan­cial gain, taxes should be im­ple­mented.

We should also en­sure com­pa­nies are not al­lowed to con­ve­niently by­pass any leg­is­la­tion set down and that cor­po­rate re­quests are re­viewed thor­oughly.

It should all be about bal­ance. Al­low any­one to em­brace our hous­ing mar­ket, al­low in­vest­ment and ac­qui­si­tions from any na­tion­al­ity any­where in the world, but have strict, fair con­trol, taxes where ap­pli­ca­ble, plus the abil­ity to mon­i­tor the sys­tem for any breach or abuse.

Many other coun­tries have the same co­nun­drum.

An area of cen­tral Lon­don I per­son­ally know very well, af­ter be­ing an agent there for many years, is boom­ing right now.

One very es­tab­lished devel­oper re­leased a new highrise, high-pro­file apart­ment scheme.

At the point of re­lease more than 50 per cent of the sales were to over­seas buy­ers.

And of the 230 units re­leased, 208 were sold in the first few hours.

ON­GO­ING DILEMMA: Rules re­gard­ing for­eign in­vest­ment own­er­ship of residential prop­erty are needed.

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