FIRB AWOL on foreign mansion purchases

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By Leith van Onselen

From The AFR today comes news that foreign buyers are buying-up Australia’s most expensive homes, with a spike of turnover reported in both Sydney and Melbourne:

A record 19 homes valued at more than $15 million each changed hands in Sydney during 2014…

Almost 75 per cent of homes selling for more than $20 million went to foreign buyers.

“The increase in foreign investment activity has resulted in a sizeable increase in high-ticket property changing hands with the volumes increasing,” Ray White Commercial research director, Vanessa Rader, said.

…”There’s a feeling that Sydney is a real safe haven”…

Australia’s foreign investment rules for residential property are straightforward.

  1. If it is an existing property, the buyer has to be either a resident, or a citizen or a temporary resident. They cannot be a foreign investor.
  2. If the buyer is a temporary resident, they must sell the home within three months of leaving Australia.

The question then beckons: assuming the article is correct and roughly 75% of Australia’s most expensive homes are being sold to foreigners, then why hasn’t the Foreign Investment Review Board (FIRB) been investigating and prosecuting these sales?

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If FIRB cannot even police the biggest and most visible property sales in the country, then what hope is there that it will police the hundreds of other potential illegal transactions happening across the nation at lower price levels?

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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.