Treasury probes illegal foreign property

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By Leith van Onselen

From The AFR today comes news that the Australian Treasury is investigating 33 cases of potential illegal purchases of pre-existing Australian homes by non-residents:

The federal Treasury said it was investigating 33 potential breaches of the law involving established residential properties. A small number of these involved “very high-value established purchases”, Treasury said.

“In most instances the investigation activity involves the need to establish the identity of the relevant investor and to assess their eligibility to own the property in question.”

It is good to see some enforcement activity finally taking place, given it was revealed earlier in the year that the Foreign Investment Review Board (FIRB) had failed to prosecute a single foreign buyer in eight years!

However, it does also highlight why major reforms are needed to the surveillance/enforcement regime. It would be far easier for Treasury to “establish the identity of the relevant investor and to assess their eligibility to own the property in question” if:

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  • There was a national register and database of property interests and citizenship; and
  • All buyers of residential real estate were required to provide proof of citizenship/residency when purchasing an Australian home, with real estate agents required to highlight the foreign investment rules at the point-of-sale and conveyancers required to check-off and report breaches at settlement.

While increasing penalties for breaches of the rules – as proposed by Liberal MP, Kelly O’Dwyer – is sensible, it is unlikely to act as an effective deterrent as long as the surveillance regime is defective, and FIRB continues to operate blindfolded, as is presently the case.

The parliamentary committee examining the foreign investment regime governing residential real estate is due to report at the end of the month.

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.