Hit squad targets dodgy foreign property investors

By Leith van Onselen

Tony Abbott continues to make all the right noises on foreign property investment, backing-up his recent assurances that the Government would implement the recommendations from the parliamentary inquiry by ordering Treasury to force immediate sales on foreign property investors. From The Daily Telegraph:

The crackdown will be directed though an elite audit and compliance unit which will be tasked with finding illegal investments and forcing immediate sales…

“If it comes to our attention that someone has bought a property that they are not legally entitled to buy then our intention is issue divestment notices,” the PM said…

“Not once in the last six years of the previous government were these rules enforced,” Mr Abbott said.

“A succession of Labor treasurers were asleep at the wheel.

“In the next couple of weeks you can expect to see more from us in regards to residential land. We want housing to be affordable … we appreciate that if there is illegal competition that is obviously going to make it much more difficult.”

The parliamentary inquiry’s recommendations to improve the surveillance/enforcement of foreign property investment will go before Cabinet within the next two weeks are are widely expected to be endorsed, thus ending the open slather approach that has existed since the Rudd Government opened the sluice gates to foreign buyers during the GFC.

While there will always be loopholes, the reforms should put an end to a large portion of foreigners buying-up Australia’s pre-existing housing stock, inflating housing and land costs, and shafting first time buyers in the process.

They should also assist in lowering the dollar as it acts as an additional prudential headwind to prevent the RBA rate cut campaign from inflating housing further.

In short, it’s a perfect example of good public policy contributing to equity, market transparency, macroeconomic consistently and national welfare, and the Abbott Government should be congratulated.

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Comments

  1. I hear a lot of talk
    I don’t see any action
    Let’s see an independent, transparent, comprehensive audit of Syd/Mel titles records for owners FIRB compliant residency status. Publish the results. Divest the non compliant.
    Sack Brian Wilson.
    FYI Sluice gates not “sleuth gates”.

      • Frederic Bastiat

        +1

        Though at least there is talk, which is the only way action will one day occur.

        The party of “fairness” (ALP) were happy to let the nation’s housing stock be sold off to the highest Hong Kong bidder.

        Something all ALP voters should have been ashamed to support, particularly when they are in up in arms about a $5 Medicare co-payment etc…

    • That is the intention.

      Setting up an effective compliance regime underpinned with sufficient legal powers takes time.

      Yes things have been too slow, but movement is in the right direction. Action will come.

    • Yes. You are absolutely right. Talk is cheap. I dont think there will be any actions any time soon! so, don’t hold your breath.

  2. Put the audit guys on a base + commission rem structure.

    $50k base + $5k per divestment notice issued and enforced.

    This audit stuff is easy.

    • “This audit stuff is easy.”

      How easy? 2x5min online searches.

      FFS What is Hockey waiting for?

    • Done, career change tomorrow. I don’t think there would be a more satisfying and giving career within my skill set.

      • Frederic Bastiat

        Is there a hope that voluntary divestment could occer now as a result of the regulatory jaw-boning.

        i.e. Why wait until you are forced to sell (alongside other forced sellers) into a market with no foriegn money?

        If I owned a $3 million house and I was a Hong Kong national, I would be looking to sell up ASAP

      • @Fred good point, the tip off has been made. Assuming the audit would likely target current/new it would be wise for the crims to divest early.

    • It isn’t the audit stuff, you are right, it is easy. It is all the systems required to track what is going on. You are potentially dealing with hundreds of thousands of cases where compliance includes immigration status, visa class, land title transactions.

      The development and implementation of the information systems to link FIRB, the states, and immigration also involves a significant investment and timeline to implement.

  3. Out source it to private equity on a 50% take of profits, within 6 mths they would list this business with a mkt cap of $500mill?

  4. He should make a real statement and start with Gillard’s sale in Altona in 2013. Purchased for probably $300K over comparable sales in the area by a Chinese mortgage broker. By sheer coincidence of course that same mortgage broker’s daughter was offered a job in Gillard’s office ten years prior, as an international student. Stinks.

    • How does that stink? If she was international student ten years ago, it’s almost certainly PR holder now. Are you saying PR holder is not allowed to overpay $300,000 for the house? Or are you saying former staffer’s family is not allowed to overpay $300,000 for a house?

      • Frederic Bastiat

        It stinks because the ALP changed the laws and then they all went and sold their overpriced properties to foreign buyers…

        It stinks because LNP members own about 3 properties per MP, and so they will never ever change Negative Gearing laws.

        It stinks because the people making the laws on this rubbish directly benefit from the unfairness of the system.

      • Well the kid actually declined the job offer and went to work for the old man in China. We give out PR for that? You must have come down in the last shower if you can’t see the suspicion in a foreign buyer who previously had some form of relationship with the PM being successful, amongst the supposedly booming interest in that property. I bet you wouldn’t see a problem in Gillard’s Hairdresser partner suddenly becoming a property salesman with an apartment developer at the same time as foreign buying rules were relaxed either? Wake up Kev.

      • @Frederic Bastiat
        If she has a PR, she is not considered foreign investor.

        Well, effectively we give visa to student who complete tertiary education and pass an English test. You don’t have to use work as a pathway to visa. The real rort is the cake making and hairdressing visa during the Howard years. All you had to do is complete a diploma and work for free for an employer for a year and you get a PR.

      • @jimbo
        We are not talking about foreign investment.

        We are taking about in this instance, Gillard sold her house legally to a PR holder, possibly an Australian Citizen. This would be the worst example of the point you are trying to make, because selling to a PR or citizen is completely legal.

      • @StatSailor

        What is the point you are trying to make?

        The sale of the home is not legal? Her family is definitely Australian citizens. Just read your link in detail and realized I actually know her.

      • Sorry, yes, trying to establish fully the Australianness as earlier Fairfax article was ambiguous.

        Also, there is no China based business.

      • @jimbo

        Just realized, I actually know this particular Stephanie Wang. She did not at anytime work in China.

      • @StatSailor

        And yes they are major Labor fans. Stephanie at one point worked for Mike Symon MP.

        It wouldn’t be out of the question to see a Stephanie Wang MP (APL) in the future. She is a lawyer, which seems to be a prerequisite for politics these days.

  5. How about every city council in the country require a passport with rates payment. We can conduct an audit of the whole country in a months and be done with it.

    • You can do the whole thing online. 2x5min searches.
      Low cost
      No legislation change required
      No inquiry required
      The incompetence is astounding

      • Is there a straightforward way to do that? I know some people who may put in the legwork to embarrass our national authorities on the subject……..

      • Access to land transfer data and electoral roll and cross match?

        Would be a start. And probably could catch a few that way.

        If you are “government” of course, it gets much easier – look at lodged tax returns (why aren’t there any? Hmmmmm!) visa records, etc. like shooting fish in a barrel. With a shotgun.

      • @ Gunna:

        Chodley Wontok’s freedom to invest is being crimped here – an outrageous turn of affairs under a L/NP government. He is entitled to claim racialism – particulary as Australia has plenty of land and a government so rich it pays people not to work.

        He knows owning 10 IP’s is the natural order of things. 🙂

      • No that isn’t right.

        The process and legal underpinnings are very important. Without them decisions of the regulator can be thrown out in Federal Court.

        There is much much much more to effective regulation that you are aware of. It isn’t an easy business.

        Anything involving councils is also an area for State not Federal law.

      • The FIRB has legal underpinnings already, its called the FOREIGN ACQUISITIONS AND TAKEOVERS ACT 1975……
        what it doesn’t have is any will to enforce the law.

    • Not everyone has (or should be forced to obtain) a passport, but review at council level probably not a bad idea. Cut in councils with a % of the profits that are seized from the sale.

      • BB Do you think that the illegal activity be rewarded with ill gotten profits or even a break even? No way! Confiscation without compensation, minimum $250k fine and no entry in Australia ever again. I’ll compromise to a 3 month amnesty, then that’s it.

        Edit: Severe punishment for accomplices too (real estate agents, lawyers, proxies, accountants…). I can see a prisoners dilemma during a come clean amnesty.

      • But they need a passport to enter the country and it should show the type of visa.

        The few resident Australian without passports should be easy to deal with via Medicare, etc.

      • Andy, did not mean to imply any remaining profit goes to the foreign investor who has purchased illegally.

        Foreign investor gets original capital – fines.
        Council get slice of profit/fine for tracking down offenders.
        Federal govt gets slice for running taskforce.
        Australian public gets remainder in form of lower taxes 🙂

      • Not going to get further into semantics coolnik, if you don’t agree then we’ll have to agree to disagree, but should:

        Going 5km over the speed limit entitle the government to seize your car?

        Downloading an illegal movie allow the government to seize your computer / TV?

        I agree with punishment in the form of fines for breaking the law, but not always in government seizure of the capital or vehicle used to do it.

      • BB: The examples you provided do not make sense in this context. The examples of car, computer that use to justify the fines are okay as long as those items are not obtained illegally in their entirety.

        How about this:

        You overspeed, cops catch you and discover that you have obtained the ownership of the car illegally (that is, the car is stolen). Should the car be confiscated or should you be paid back your money when you bought that car from a sketchy dealer, fully knowing that car is stolen?

        Or how about: cops catch you in possession of drugs obtained in an illegal manner. Should the drugs be confiscated or should you be reimbursed for the illegal investment you made purchasing them?

        It is not semantics.

    • You just need the residency and citizenship check at purchase. Also a money trace from the banks. If you are buying with a mortgage, your bank provides a certificate stating this. If you are buying with cash, your bank(s) provide a certificate(s) stating that the money has been in the bank account for more than 18 months etc.

      • @andy!

        The solutions are so simple, and so within the government’s capability that the only available conclusion is that whoever the FIRB reports to doesn’t want them to do anything.

      • Your solution has a gaping hole. Foreign cash transfers can be patents helping children buying property. Unless you ban parents helping children buying properties, there is no way to enforce it.

      • @kevin,

        If you ban parents helping children, there won’t be an RE market at all – prices will plummet 70% overnight. based on Australian parents no longer being able to help their kids.

      • @kevin

        If the children are legally able to purchase than it is not illegal for their parents to provide them with money. I am not asking this to be policed. It is those that are purchasing on behalf of others that don’t have residency and are not offspring.

  6. Today I opened my SMH and read these words from our Prime Minister;
    “We are a free & fair nation.But that doesn’t mean we should let bad people play us for mugs, and all to often they have. Well, that’s going to stop.”

    I initially thought it was his resignation speech

  7. I think the difficulty is that the existing (and proposed regime) doesn’t address one of the most significant loopholes – non-resident foreigners purchasing through the names of resident family and friends. This is a very common practice – and perhaps for cultural reasons, the true buyers are not concerned by the fact that legal title is then held in someone else’s name.

    It is as a result of this that I doubt the crack down will have the impact some are expecting.

    • No worries, just get the blatant evaders (buying direct/not divesting on exit) in “round one”. I’m sure that there will be 10,000 or more.

      Round two can get more sophisticated. Announce all professionals (lawyers/accountants/re agents/financiers) who suspect they may have aided someone to circumvent FIRB have a 1 month amnesty to make voluntary disclosures, contravention a found after this date get handled severely…

      • How about all lawyers/accountants/re agents/financiers/etc, at time of license renewal, must sign a statuatory declaration stating they have not knowingly assisted the illegal act. That way they are criminally liable. Of course there is an amnesty for the first round of this where they can fess up and help without penalty.

    • You would have to really trust someone using your funds to purchase assets in their name as it wouldn’t be easy to retrieve funds. So this would probably be immediate family members in most cases.

    • The pecuniary penalty regime for lawyers, real estate agents, and anyone else knowingly assisting violation of the rules (if properly applied and enforced) would manage, if not eliminate, that issue.

      • “pecuniary penalty regime for lawyers, real estate agents, and anyone else knowingly assisting violation of the rules ”

        This is a side show.

        FIRB compliance enforcement can be achieved with one simple administrative step.

    • I agree tripster.

      Not only is the practice you describe perfectly legal and within the current rules, so too is the purchase of existing, established property by the approximately 750,000 foreigners with temporary residence status, living, working or studying within Australia today.

      The “crack down” is mainly a dog whistle for PR purposes and will have limited effect in reducing sales of established homes to foreign nationals.

      What is urgently needed is a reversion to the FIRB regulations that were in place prior to the changes made in 2010, coupled with severe penalties for all (buyers, sellers and agents) who break the rules.

      • ‘..perfectly legal and within the current rules, so too is the purchase of existing, established property by the approximately 750,000 foreigners with temporary residence status, living, working or studying within Australia today.”

        It is illegal under the FATA for a temporary resident to purchase an existing dwelling without prior FIRB approval.

      • Yep, the FIRB website is clear wrt temporary residents that as long as you tell them before or after you purchase the property (see FAQ 9.1) and promise on your honour as a boy scout to sell the property at some stage after you leave Australia (see policy page 9), and that you definitely mean to live in it (also page 9), you will be approved (see policy page 5).

        That’s why Socrates Vassilades’ purchase of 3 Towers Road, Toorak was completely above board – it met all those criteria.

      • I’m a little confused here and very wary of Oz reactions to things viewed as ‘foreign’ and maybe an aspirin and a lie down is best …. there does not seem to be a consistent view as to exactly what the problem is, and in Oz eyes who a ‘foreigner’ or a ‘chinese’ person is, in conunction with anecdotal and cherry picking to support the negative (plus some assumptions of laxity on PR processes)?

        If ‘chinese’ buying property ‘illegally’ in Australia is so widespread and prevalent, surely it is simple enough to analyse the issue and provide rough data on ALL foreign purchasers, at least to give a picture based on evidence and not emotions? Conversely because there is inadequate data does not make the negative true let alone a conspiracy…..

        From that the govt. can look at solutions, if there is indeed a problem, based upon evidence versus opinions and rabble rousing?

        What happens if it is found that ‘chinese’ are just one of many nationalities that have been buying and investing, but are simply more visible compared with e.g. South Africans, Europeans, British, Irish etc.?

        In the past and the present the British had and I assume still have significant property holdings, and many till a generation ago did not require Oz citizenship e.g. they could work in the APS.

        Further, what if local communities or councils in cities, or especially regions decide they do not want to cooperate with the govt. agencies and other ‘communities’ on restricting foreign or ‘chinese’ purchases in their local ‘community’?

        Careful, this is sounding like RT or Fox News but you may find people quoting Niemoller’s poem ‘First they came for the socialists…..’ Yes so get rid of all these nasty ‘foreigners’ etc., but a word of caution, setting a preedent in witch hunts, who will speak for you?

  8. Targeting alien property investors is extremely rashist. All humans should have equal rights when it comes to increasing the value of our homes so that we can all maximize our profits.

    • And if you don’t own a property get in and enjoy an almost immediate boost to your growing wealth.

      Joking aside, I actually know people who after leveraging to the max to buy a house started spending more and living a more luxurious lifestyle?? Can this really be sustainable long term?

    • Absolutely! The more suckers we can get to buy top dollar real estate now, the more property we can buy back later at a quarter of the price. That this is official govt policy is obvious! (although of course unstated)

    • No, they don’t need more staff, but they probably need a little legislative amendment reversing the onus of proof – up to purchaser of land to prove that he is eligible, if that’s not already the case.

      Then just write to suspicious-seeming homeowners asking for the proof to be provided.

      No reason why each of the 8 staff can’t send 20 letters per day. At 800 queries per week, they will get through at least 20,000 transactions per year, even when later they have to slow down to read the responses & reply with a divestment notice/pass suitable ones to federal police.

      • Shouldnt this be the job of the RE and vendor’ssolicitor as they are the ones selling the property on behalf of the vendor…like when a shop owner selling cigarettes or alcohol…proof of age is requested.

      • Oh c’mon AB productivity is through the roof there! They’ve managed 100% compliance with only 8 full time staff.

  9. What’s the chance that, once they get the hang of things, and build up the database the next round is NG fraud. All that accessible information. I think I agree with Reus. You cannot crimp anyone’s right to get rich off housing.

    • NG Fraud aye.
      Dont be surprised if you are right on this.
      From what i hear from my tax agent, NG fraud especially with FHB who get grants is rampant. From what hes told me no one, not a one is getting audited or pinged on it. And i when i asked, he told me he is under no obligation whatsoever to report it.

  10. Good old Australia, where the only industry we know is to sell anything and everything to foreigners.

    • Everything that we have, rather than what we create. We’re world class at selling the sources of our wealth.

    • Indeed PowerM and McP, I often wonder is it because we started off as basically a colony where pillage and plunder was the order of the day. Is this mindset still part of our character, you know rip the place to shreds who gives a toss about the natives they’re not human anyway sort of thinking. It’s as if we don’t really belong here, and this mix of new multicultural character together with fourth and fifth generation settlers isn’t really caring about the Lucky country, it’s all about what’s in it for me?

      • I think my observation mostly matches your thinking. Having been born and bread in Sydney, the city is devoid of sense of a common community now, it seems every area is a fiefdom of a part particular culture or ethos only interested in pushing their particular barrow. Whether it be personal greed and selfishness or establishing a exclusive identity only open to a particular culture. Top this off with an homogenising and white-anting of our retail and corporations, with a massive sell off to foreign interests, it seems Australia as a brand is in conflict with itself.

        A North American friend of mind recently commented on how to Australia tries to project itself to other nations as a country of mateship, easy going, laid back and friendly people. This is how all his friends from back home and himself thought of how Australians would be, but it is a complete fabrication. He said he was very disappointed when he moved here to find Australia to be fragmented, greedy and self-indulgent, all too keen to sell whatever we have to make a quick buck.

        We have lost our way but blindly think we a still the same.

  11. Anyone know how this will work with respect to policing purchases by Australian registered Trusts (where the Trustees may be partly or mostly foreigners)?

    Similarly for Australian registered companies where the share owners are majority or significantly minority foreign?

    In both cases the purchasing entity is “Australian” for all intents and purposes although in reality its a vehicle for sidelining the FIRB?

    Loophole?

    • Speaking of loopholes:

      FIRB frequently asked questions number 9:

      “Q9.1. I have already bought residential real estate (or entered into an unconditional contract) to buy a property and did not obtain approval. What should I do?

      If you have already bought a property without an approval, … you should apply online as soon as possible. You may be able to obtain ‘retrospective consideration’ of such a purchase, provided that it was not contrary to the national interest.”

      Easy – everyone who has bought a property without prior approval just need to keep calm and apply now to avoid any sort of penalty.

  12. Its too hilarious watching the mob that forwarded the meme of home ownership as the apogee of human existence [I’m a land owner equals enhanced social rights] be hosted on its own petard.

  13. Here is a question for Tony’s “hit squad”

    Why is the FIRB approving any (let alone 5000+p.a.) sales of existing dwellings to temporary visa holders?

    • Because they have to slavishly adhere to the Treasurer’s policy. Better to put the question directly to Tony, than any “hit squad”.

  14. Should be dead simple. Review every property sale in Melbourne and Sydney (and other capitals) since the early 2000’s and you will find 1000s of existing stock sales to foreigners. Should take a week given governments record details of every settlement.

    Let’s see how it goes. If we have seen zero action in the next 60 days it means it is just more blatant lies from this mindless wingnut and his cored multinational serving blanks (read Neal Asher Spatterjay for a description of our politicians).

    They already have all the legal evidence. There should be fire sales starting immediately in most captital cities ( mainly Melbourne and Sydney but Brisbane should be noticeable as well).

    What about prosecuting the agents and law firms who blatantly facilitated these illegal transactions?