As property prices rise around the country and property transactions still inspire confidence in investors to build their own private wealth, the government is cracking down on property illegally acquired by foreign investors with fifteen properties in Victoria and Queensland, worth a combined $14m, forcibly sold off in the latest round of divestments triggered by the Australian Taxation Office’s ongoing investigations.
Treasurer Scott Morrison said that to date, foreign investors have been forced to sell off more than $100m worth of illegally acquired Australian real estate. This brings the total number of forced sales of properties in breach of foreign investment rules to 61. The properties have a combined value of around $107m.
Mr Morrison said 179 notices were issued in September to foreign investors who broke the law when purchasing property in Australia. These properties were purchased in New South Wales, Queensland, Victoria, and Western Australia, for prices ranging from $200,000 to $2m. The buyers came from the United Kingdom, Malaysia, China, and Canada.
According to Mr Morrison, some “2,200 matters” are currently being reviewed by the Foreign Investment Review Board, with an estimated 400 “remaining under active investigation since the new regime.”
Speaking to Sky News on Monday, Mr Morrison said the residential real estate assets that were illegally acquired by foreigners were not limited to the prestige market, but also encompassed the lower end of the market. This had the unfortunate effect of locking average Australians out of the property market.
Foreign nationals who illegally acquire property are forced to pay a percentage of the value of the home as a “civil penalty.”
“We’re trying to ensure, I think with some success, that our foreign investment rules are enforced on every occasion,” Mr Morrison said. “And to those who think they can then creep in and snatch away some property from the hands of Australian homebuyers, well we’ve got news for you: you’ll be forced to sell it and do that forthwith.”
To avoid getting involved in potential debacles, sellers should consider these valuable tips when dealing with foreign buyers:
1. Complete due diligence about the buyer: Sellers should ask their solicitor to complete due diligence about the buyer. Among other things, it needs to be ascertained if the buyer is an Australian citizen, and whether he or she has the right to buy new or existing property under Australian law.
2. Seek professional assistance: Sellers should find a solicitor and financial adviser with extensive experience in international property transactions. This can be difficult as transactions might involve other legal systems and/or overseas banks.
Ensure that your solicitor checks that any sale to an overseas buyer has been approved by the Australian Foreign Investment Review Board and that the finance being used to complete the settlement is from a known and reputable lending institution.