In a surprise development the Austrian authorities have announced a raft of suspected cases of illegal foreign ownership of Australian real estate. This comes just a few months after the Australian government ordered a review of the influence that foreign investors are having on Australian property prices. An initial review suggested the influence was minimal but it seems that the public are demanding a clampdown on foreign ownership of Australian real estate assets and the politicians are being forced to see this through.
Foreign Investment Review Board
The Foreign Investment Review Board is the government appointed board which authorises the acquisition of Australian real estate by foreign investors. They will take into account a whole array of different information including visa entitlements, changing circumstances and the type of properties acquired by foreign investors.
It seems that six properties acquired by foreign investors in Sydney, Brisbane and Perth (valued at up to US$1.38 million) have received statutory sale notices from the authorities. While this initial forced sale program is fairly small the authorities have also revealed there are a further 462 possible breaches under review. So, what are the implications for foreign investors? How will this impact the Australian property market?
Playing by the rules
As we touched on above, the Foreign Investment Review Board has been around for some time now and is in sole charge of authorising the acquisition of Australian real estate by foreign investors. Taking into account the recent raft of statutory sale notices, and other purchases under consideration, it seems that the authorities are now playing it by the book. This then begs the question, are these alleged breaches of foreign ownership a new phenomenon or have they simply been ignored in the past?
Over the last few years China has replaced the US as the largest investor in Australia as a whole and in particular the Australian real estate market. It now seems that, with the public opinion suggesting undue influence by foreign investors, politicians are playing to the gallery and putting foreign investors under the spotlight.
In the short term there are a number of potential properties which could be placed back on the real estate market. It will be interesting to see whether potential buyers attempt to undercut the “market rate” of these properties to facilitate a quick transaction. In theory these statutory sale notices have a twelve-month expiry period which should be more than enough time to arrange the sale of said properties at the current market rate. However, there is some uncertainty with regards to the short to medium term direction of worldwide interest rates which could impact property prices over the coming months.
The longer term implications should be fairly minimal because in reality all foreign investors, and those holding temporary visas, etc, should already have been abiding by the Foreign Investment Review Board rules and regulations. We may see some media backlash from foreign investors caught in the crossfire but this is perhaps more of a superficial move by the authorities, to curry favour with voters, rather than a meaningful change in regulations going forward?