In a 119-page report tabled in parliament yesterday, the House of Representatives Standing Committee on Economics made 12 recommendations that could see a regulatory overhaul of enforcement and penalties to curb foreign buyers, including a mandatory application fee, a national register and greater surveillance on the funding sources of certain foreign nationals.
The committee recommended the government introduce a civil penalty regime for breaches of the foreign investment framework as it applies to residential real estate.
“Third parties (such as real estate agents, lawyers or accountants) who knowingly assist a foreign investor to breach the framework as it applies to residential property should also be subject to a civil and criminal penalty,” the committee said in its report.
Penalties would be calculated as a percentage of the property value “to act as an effective deterrent”.
The committee also noted that the sources of financing used by some foreign nationals to purchase residential real estate in Australia is a potential concern, including the possibility that shadow banking may be involved in some cases.
“The extent of this issue is uncertain but it would be prudent to ensure that any transactions involving an overseas purchase of an Australian property can be thoroughly investigated if considered suspicious,” the report recommended.
As a result, the committee considered that it would be desirable for the Treasury and Foreign Investment Review Board to use law enforcement data where applicable, as part of its internal screening processes of foreign purchases of real estate.
The Real Estate Institute of Australia welcomed the report, which it said had delivered on key recommendations.
They include the establishment of a national database for property purchases, an alert system with the Department of Immigration, and a better-resourced Foreign Investment Review Board with a greater focus on audit and compliance.
Chief executive Amanda Lynch said the committee’s recommendations would restore faith in the administration of foreign investment in Australian real estate.
“Foreign investment in Australian real estate has been proven to increase housing supply, but is also a highly charged and emotional issue,” she said.
“The system, particularly for established housing, needs to be transparent and instil confidence in the Australian community that it is fair and equitable. These report recommendations, when implemented, will go a long way to providing this confidence.”