Foreign investor fees still up in the air

By Martin North, cross-posted from the Digital Finance Analytics Blog

Speaking on ABC Insiders yesterday, Josh Frydenberg, Assistant Treasurer made the point that the foreign investor regulations, recently announced were open for consultation, and that a number of issues had yet to be resolved. For example, should a foreign investor pay the fee each time they apply to purchase a property (so bidding on multiple properties would mean multiple fees)? Or should they pay one fee to cover multiple potential transactions? If they are not successful in purchasing the target property, is the fee refundable? He appeared to be advocating paying the fee before putting a bid in, one fee for multiple bids, and refundable if unsuccessful.

However to decide, we need to know if the fee is simply to cover the cost of appropriate agency administration, or whether it is designed to be a barrier to transact. It is not clear for the available material which is envisaged. Administration would be a combination of assessing the credential of the individual (so once per person), and also the property (so once per property). Also, if unsuccessful, is it appropriate to refund the entire fee? After all, the work needs to be done before allowing a bid (else if you only pay after a successful transaction, what happens if you were declined subsequently, once you have contracted to purchase?)

He also confirmed there had been no action taken on a residential purchase by a foreigner since 2006, adequate data was not being collected, and cross agency communication was not effective.

Clearly more work needs to be done to design this right. DFA suggests that a foreign investor should be able to make application for approval to purchase property in Australia. This should be a licence, which needs to be maintained and renewed from time to time. Then there would be a fee payable on each property application. This latter fee would be refundable in the case of an unsuccessful sale. It would also reduce the red tape so some extent.


  1. What a storm in a teacup!

    All these things about bidding, transactions not going through, etc, are red herrings.

    These guys are going to be buying new-build apartments, right? Last time I checked, they don’t go to auction.

    • They can buy existing houses and do a unit or apartment conversion. Completely legal. In fact for the price they pay, and the dropping Aussie dollar, the only way they can make money is to do a knockdown and high density rebuild.

      • Torchwood1979

        Fantastic, that will help with our chronic undersupply. We need more Chinese investors and a falling Aussie to save us!

      • No it won’t, the demand for housing is infinite… As long as the bank keeps bankrolling the punters.

        Also, the new units/apartments are open to foreign investments because those don’t have restrictions.

      • If they’re temporary residents they can buy one existing house, and, judging by Socrates Vassiliades and 3 Towers Road, there is no lower limit on how long you have to live in the damn thing or upper limit on how long after you return home before you have to sell it.

        As long as you make sure no one else lives in, anyway (i.e. you mustn’t rent it out).

        I assume that is the point of giving millions of dollars to students to buy houses.

  2. What the f***? We are being raided by foreign investors on our established housing, driving out local buyers and making life harder, and all people can think about are the poor foreign raiders?

  3. I read the editorial in the sydney morning weekend edition.

    It was simple, they are against this move by the govt. In a half page piece they outlined their concern for the construction industry (depsite these rules not impacting new purchases), and made the comment the enforcement of these fees (and existing law) sends the wrong message abroad! The message should be “australia is open for business”, which I assume also means, “buy whatever you can”. Business is a transaction of good for services. In SMH it means cash for land and property. I don’t really see that as long term productive business!

    The website has a poll however, and 90% of people are in FAVOUR of the new rules.

    • The website has a poll however, and 90% of people are in FAVOUR of the new rules.

      And it shows in the new polls for the liberals.

    • SMH is undermining its relevance as a news source. People are wise to its property bias. If they’re not careful the newspaper will die a death and all they will have left is Domain, a 2nd rate property portal that is getting totally dominated by

    • To be clear, the proposed changes DO affect purchases of new dwellings, by slapping on a $5000+ fee.

      Whether or not you think that’s large enough to impact on purchases is another question.

      The administration fee flagged by last year’s inquiry was along the lines of $500-$1500, which makes me think that the Government is either going for a revenue grab, or trying to discourage investment in new dwellings with proposed the higher fee.

      • Revenue grab, surely.

        Joe talked up the contribution to the budget last week, and if you really wanted to the process down, wouldn’t the fee be nearly as much as stamp duty?

  4. Exactly WHERE was the line drawn in the sand?

    Was it when Kelly O’Dwyer spelled out in the clearest language possible that FIRB was essentially incompetent?

    What action was taken by FIRB following delivery of the report?

    Did they suddenly start doing their job?

    Or is Australia still “open for business”?

    Where are the reforms that would require an agent or auctioneer to cite and verify eligibility during a registration process prior to a Red Raider bidding at auction?

    There are many simple steps that could have taken place if there was any interest in enforcing the law. In absence of such one can only assume they want the appearance of action with no underlying changes.

    Have we heard from FIRB yet?
    Go take a look here..

    See the language only says that they *should* get approval, not that they MUST. No updates since 2012 by the looks of it.

    Also, what reforms are proposed for Companies acquiring Real Estate?

    All the loopholes must be closed.

    • You don’t need to go that deeply into the FIBR website.

      Everything you need to know is on the home page:

      “The Australian Government welcomes foreign investment. It has helped build Australia’s economy and will continue to enhance the wellbeing of Australians by supporting economic growth and prosperity”

      EDIT: Oops, Freudian slip. Should be FIRB, not “fibber” above.

  5. I don’t see anything happening here. Its the same old song as the mining tax but with a different feeling. Lots of talk, lots of hot air, lots of proposals, lots of legislation drafted but in the end nothing…

    Australia is going to double down on selling everything that isn’t nailed down and everything that is nailed down to finance its past and continuing current account deficit. Get used to it.