Six homes brought illegally by foreigners will be sold and a further 462 sales are under investigation with the Treasurer, Joe Hockey, telling Australians more will be forced to sell soon.
In May, we reported the enforcement of legislation surrounding real estate sales to foreigners would be transferred to the Australian Tax Office and harsher penalties be introduced for both foreigners who flout the laws and real estate agents, developers and third parties assisting in the transaction. (“Passive foreign investment watchdog relieved of enforcement duties“)
Foreign buyers are free to purchase new homes that increase housing stock in Australia, but are banned from purchasing existing homes. In recent years, a flood of foreigners have been breaking the laws with little repercussions from the overwhelmed and under resourced, Foreign Investment Review Board.
Under the new legislation suggested to be introduced on the 1st of November 2015, owners who have illegally purchased property in Australia will be given an government amnesty and will not be prosecuted, if they voluntarily come forward prior to the 1st November. The announcement of the 6 homes to be sold over the weekend fall under this amnesty.
In just three months, the Australian Tax Office, The Foreign Investment Review Board, the Department of Immigration and AUSTRAC (The Australian Transaction Reports and Analysis Center with regulatory responsibility for anti-money laundering and counter-terrorism financing) have been busy uncovering some 462 illegal transactions.
Fears are growing that the army of foreigner buyers are destabilising the Australian economy, creating troubling housing bubbles in Sydney and Melbourne. Those who are buying existing stock, are pushing up prices at break neck speed and pricing Australian’s out of the market.
Foreigners, predominately Chinese, like the Sydney and Melbourne property markets with apartments and high-rise living akin to their home country. The latest CoreLogic RP-Data revealed Melbourne home prices shot up 4.9 per cent in just the single month of July. Just as dangerous, Sydney home prices surged 3.3 percent for the month.
The Sydney and Melbourne property bubbles have regulators struggling to gain control. The banking regulator has forced banks to slow down their residential investor lending, re-weight their mortgage books and increase loss absorbing capital to help protect the banks in the downturn.
ANZ was the last bank forced to increase capital, announcing on Thursday its intention to raise 2.5 billion from institutional shareholders and a further $500 million from retail shareholders. The bank’s share price was smashed on Friday, when it resumed trading, plunging 8.5 percent in morning trade to finish the day 7.1 per cent down.
While the capital raising won’t be a surprise for our readers (‘Banking regulator announces tighter capital adequacy requirements for residential mortgages), the move by ANZ appeared to catch investors off-guard sending the Australian Bourse down 2.4 per cent on Friday, the biggest fall since May 2012.
All eyes are now on the Commonwealth Bank of Australia who is set to report this week. Analysts suggest the bank is falling behind its peers in terms of capital buffers and could be forced this week to raise $5 billion, some suggesting as much as $7 billion.
» Investigations into foreign investors allegedly illegally buying Australian homes more than doubles – The ABC, 8th August 2015.
» Six foreign-owned properties to sell with more to come: Hockey – The Australian Financial Review, 9th August 2015.
» CBA tipped to raise capital amid $9.1b full-year profit forecast – The Sydney Morning Herald, 9th August 2015.
» Home prices surge, Melbourne and Sydney lead gains again – The ABC, 3rd August 2015.