Pressure builds on FIRB to police foreign buyers

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By Leith van Onselen

Several real estate insiders have spoken-out about illegal sales of Australian existing housing to foreign buyers, placing increasing pressure on the Foreign Investment Review Board (FIRB) to enforce the rules that preclude non-residents from buying-up pre-existing homes. From The Australian:

Buyer’s advocate David Morell said there have been many illegal house acquisitions in Melbourne that would have not met Foreign Investment Review Board requirements…

“There’s something wrong when a 22 year old is buying a multi-million dollar property, it just doesn’t add up.”

Mr Morrell said he had seen auctions in Toorak attended by three different Chinese buyers who did not understand the auctioneer. “You can’t tell me they were local,” he said.

In Brisbane, John Johnston of Johnston Dixon Quality Property said there have been thousands of illegal property purchases…

I live in the Boroondara local government area of Melbourne, and let me tell you that purchases by foreigners is rife. Barely a weekend goes by that I don’t hear about established homes selling in my area for crazy sums to Chinese buyers. Discussions with a prominent local real estate agent has confirmed that such illegal sales are common.

Unfortunately, instead of vowing to conduct an audit of all recent property sales, in a bid to flush-out the illegal buyers, Treasurer Joe Hockey has instead used the diversionary tactic of going after the sale of a few high-priced mansions. From The Australian:

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The Australian Tax Office… has identified a property which sold recently for $40 million…

“There are a number of properties being investigated and they are not just in Sydney,” said a spokesman for Mr Hockey yesterday.

“There will be more to come,” he said.

While any action against illegal property sales is welcome, the crack-down needs to be widespread and include ordinary homes if it is ultimately to be successful in deterring illegal activity.

A few high-priced trophy homes certainly won’t cut it.

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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.