This article appeared first in Bloomberg News on May 1, 2015, with the headline, “Australia Plans Fines, Jail for Illegal Foreign Home Purchases.” It in the Vancouver Sun on May 3 with the headline shown above. Below are excerpts. See articles for full text.
For people in Vancouver, especially the #donthave1million Twitter campaign, see our comments at bottom. Nothing will change in our local housing market unless the citizens press for policy changes at all government levels — not just to increase supply, but also to deal with inappropriate and excessive demand.
Australia Plans Fines, Jail for Illegal Foreign Home Purchases (David Fickling, Bloomberg)
- Australia will jail foreigners who purchase homes illegally as the government seeks to slow a surge in house prices, Prime Minister Tony Abbott said. Sentences may stretch to three years and fines to A$637,500 ($500,500) for illicit buyers, with penalties also on third parties knowingly complicit in violations, Prime Minister Tony Abbott said Saturday in Sydney. The steps are needed to give the public confidence that foreign-investment rules on property purchases are being enforced, he said.
- The penalties will tighten scrutiny on overseas buyers at a time when record-low interest rates are driving up Sydney property prices five times faster than wages…
- “What we want to do is ensure that illegal foreign investment is not unnecessarily driving up prices,” Abbott said. …
- Overseas buyers are only allowed to purchase newly built homes in Australia and need the permission of the Foreign Investment Review Board. Approved overseas purchases of Australian homes more than doubled to A$34.7 billion in the year ended June, with China overtaking the U.S. as the biggest source of capital, the board said in its annual report Thursday.
- Least-Affordable: Sydney ranked third among the least-affordable major metropolitan housing markets worldwide, after Hong Kong and Vancouver, according to a report in January by Demographia.
- …In Victoria state, foreigners buying houses will pay a new tax equivalent to 3 percent of the purchase price, the Age newspaper reported Saturday. The measures will raise about A$279 million over four years, the newspaper quoted state Treasurer Tim Pallas as saying ahead of his first budget on Tuesday.
- Risks to Australia’s economy from property speculation and household debt will be one of the main issues studied by an International Monetary Fund team visiting the country next month, the Australian Financial Review quoted the fund’s local mission chief as saying today.
- Price Gains: House prices increased 15 percent in Sydney and 11 percent in Melbourne over the 12 months to April 30, according to data from CoreLogic RP Data.
- Under the new law, individual buyers found guilty of breaching foreign investment rules will face penalties of A$127,500 or three years imprisonment. A higher A$637,500 fine will apply to companies. Third parties who assist investors in breaching the rules will face fines of A$42,500 for individuals and A$212,500 for companies, according to an e-mailed statement from the prime minister’s office. The government plans to introduce legislation on the measures later this year and ensure the changes are enacted on Dec. 1.
‘A Fair Go’: “What we want to do is to maximize the opportunities for Australians to buy a home at the best possible price,” Abbott said. “We want people to be absolutely confident that local people are getting a fair go.”
CITYHALLWATCH COMMENT: #donthave1million folks and anyone who cares about housing prices, take note. The current regime at Vancouver City Hall had had since 2008 to investigate the situation and devise policies. But the kinds of actions being applied in other jurisdictions, like this example from Australia, are no-where on the agenda yet. The Vancouver Affordable Housing Agency formed in July 2014 was supposed to look into speculation and related topics, but has just now proposed initial actions (a website to report empty houses) to start collecting data. Far too little, too late.
For example, what about the quick and/or frequent “flipping” of properties, and people buying properties and leaving them vacant because they only use them a few weeks of the year?
These items would seem to be eligible to control through Federal tax law (e.g., people could be charged (more) tax on “winnings” from property flips that do not involve a principal residence). Provincial property tax changes could boost taxes for non-resident owners (e.g., the “Homeowner Grant” program could be eliminated with a new “two-tier” tax system: basic property tax for owner-occupants, “basic tax times two” for investor units held by Canadian citizens, and “basic tax times ten” for foreign residents who are buying properties, whether for flipping or as vacation homes.)
But as the development and real estate industries are cash cows, and major funders of municipal and provincial politicians’ campaigns, the regimes in power may be effectively in a conflict of interest. Should they serve the public above all? Or the industry that funds them?
Public scrutiny and more pressure is needed.
The real estate industry may also be complicit. There is a large gap between financial institutions and realtors in the reporting of large cash and/or suspicious purchases of property. Police agencies, governments, and realtors’ associations should put a high priority on investigating these discrepancies, going back seven years, and deal properly with any cases of violations.
For more information on many of these topics, including tools available to governments, see our compilation of related stories here:
www.cityhallwatch.wordpress.com/money (Global Money Impacts)