Government Plans New Fees For Foreign Property Buyers; Forces Sale of $39 Million Mansion
Thursday 5 March 2015 @ 11.31 a.m. | Trade & Commerce
Last week, the Federal Government announced plans to increase fees for foreigners buying residential properties in Australia, while also introducing overall heightened scrutiny of foreign investment in Australia. Prime Minister Abbott told the Australian Financial Review he wanted to ensure Australians were operating “on a level playing field”. The Government has already kicked off the crackdown, announcing this week that Villa del Mare, a $39 million mansion in Point Piper, was to be subject to a controversial 90 day forced sale order for breaching foreign investment rules.
New Fees
The Government has announced plans to charge foreign home-buyers a fee of $5,000 for properties valued under $1 million, with an additional $10,000 payable on every additional $1 million. Mr Abbott told the Australian Financial Review reports the fee structure was similar to New Zealand and less strict than Singapore or Hong Kong.
Along with the increased fees, the Government also wants to more strictly enforce the rules on foreign investment laws, and would establish a register of foreign national buyers. Law breakers would face forced sell-offs and fines that could be up to a quarter of the value of the property. Applications from foreigners to buy businesses worth more than $1 billion would also attract a $100,000 application fee.
Mr Hockey has said the scheme could raise up to $200 million a year. The proposals are currently undergoing four weeks of community consultation.
The Property Council of Australia told the Australian Financial Review that they believe “the fees are excessive and are a stamp duty by stealth”, that “will mean fewer investors, higher prices, and fewer homes built”.
Villa del Mare Forced Sale
Treasurer Joe Hockey has issued a divestment order for the $39 million Point Piper mansion, which requires the property to be sold in the next 90 days, or the matter will be referred to the Department of Public Prosecutions. According to Domain:
“[t]he extraordinary measure has shocked prestige agents who had believed the purchase did not require approval from the Foreign Investment Review Board [FIRB] because the purchase was in the name of an Australian company.
However, a spokesman from Mr Hockey’s office said the sale was an illegal purchase because Golden Fast Foods was a shelf company for the Hong Kong-based Evergrande Real Estate Group.”
The spokesman also said if the Hong Kong company had sought FIRB approval it would have been rejected, as foreign buyers are not allowed to purchase established property. The Evergrande Real Estate Group is owned by Xu Jiayin, who has an estimated wealth of $8.5 billion.
Several prominent real estate agents have expressed concern about the nature of the forced sale and the exceptionally tight timeframe. Ken Jacobs from Christie’s International, who sold the property, told Domain:
“[t]his is a group that bought with the best of intentions and paid a major international accountancy firm to ensure everything was done correctly within the rules.”
Bill Malouf, also from Christie’s, said that:
“[i]rrespective of what happens with Villa del Mare, it's just ridiculous to expect to sell a property like this in 90 days. You need six to nine months to sell it for a fair and competitive price.”
More Investigations to Come
Mr Hockey also told reporters that the government is currently investigating a number of other properties, telling the Sydney Morning Herald:
“It’s amazing how many phone calls we got this morning… It is hugely important we have integrity in the foreign investment regime.”
However, he qualified his statements, saying that only “realistic” evidence would be investigated, saying “we are not going on a witch-hunt and we don’t want to create an atmosphere of xenophobia”.
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