Following a year in which home prices in Sydney have risen 13 percent, and an estimated 18 percent of homes are being sold to Chinese, Australian lawmakers are recommending tighter controls on sales of real estate to overseas buyers.
An Australian parliamentary committee recommended on Thursday that existing controls on sales of housing to overseas buyers be more strictly enforced, and that penalties be imposed for anyone violating these codes.
The committee began looking into foreign real estate purchases in Australia amid growing popular concern that locals are being priced out of the real estate market.
“Systems Failure” and a New Regime on the Way
The committee chairperson found that the current rules on foreign purchases of Australian homes were not being enforced and called the current situation “a systems failure,” according to a report in Reuters.
In all the committee recommended 12 steps to more tightly monitor and control home sales to foreigners, including civil penalties for foreign nationals who violate the current codes, as well as penalties for agents or other parties who aid in such violations.
The recommended measures also included the creation of a national register of land title transfers that would indicate the citizenship and residency of all home buyers.
In Singapore a ten percent duty was slapped on home sales to foreigners in 2011, after mainland buyers helped to drive housing prices up, and this rate was increased to 15 percent in 2012. In Hong Kong, which also saw home prices surge due to mainland demand, a similar 15 percent tax was put in place to cool down the market in 2012.
Prices in Sydney rose more than 13 per cent in the year to October, and some of China’s richest citizens are said to have been buying multi-million dollar mansions in expensive parts of the city.
Chinese Buyers Seen Driving the Boom
While the parliamentary committee did not mention Chinese buyers, or any other nationalities in its findings, there are widespread reports that demand from mainland investors is transforming the Australian property market.
A report released in August this year by Hong Kong-based securities house CLSA found that China is now the top source of foreign-capital investment in Australian real estate, and that trend appears to be accelerating in 2014. The appetite for homes in Australiia comes as China’s own real estate market has entered a nearly year-long slump, and many of the nation’s wealthy are looking for new places to invest.
In a report earlier this year, Credit Suisse estimated that 12 percent of all new home sales in Australia – and up to 18 percent in Sydney — involve Chinese buyers. The investment bank predicted that Chinese would purchase $39.5 billion worth of Australian residential property over the next seven years.