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The consequences of foreign property investment in Australia



What does foreign investment mean for the country within the next 10 years? Australia is divided on the impact of foreign investment upon its housing market.

Auction-Flag1Some argue that the investment is helping to drive up property values, a trend that could see domestic house hunters become increasingly priced out of the market in the coming years. The focus of international interest upon cities such as Sydney and Melbourne, where prices have increased the most in recent years, suggests this could well be the case. The Reserve Bank of Australia, on the other hand, has argued that foreign demand is boosting the Australian economy by making it more integrated with others in the Pacific region.

 

Foreign investors to pay the price

There are restrictions on overseas investment: non-resident foreign buyers are only permitted to buy new build homes, a rule designed to harness foreign demand to boost property supply. This also means that overseas buyers tend to buy different properties to domestic buyers, which could minimise the impact foreign investment has upon the price of existing homes. (Temporary residents are permitted to buy an existing home to live in while they are in the country.)

The government has now introduced a fine for investors who have purchased properties without approval.

 

Concern, however, surrounds the amount of illegal investment in the country: investment in existing homes jumped 32 per cent to $7 billion in 2014, according to the FIRB. In response, the government has now introduced a fine for investors who have purchased properties without approval, with a deadline of December 2015 to declare their purchases or be prosecuted. Buyers will face up to three years in jail, while some will be forced to sell their home.

With these measures coming into effect immediately, within the next 10 years, hopefully only the positive impact of foreign investment will remain.