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Are new restrictions going to kill the foreign buyer market?

Date Posted: Mar, 2015

By Rich Harvey, CEO, propertybuyer.com.au

There has been significant buzz in the media about recent restrictions floated for overseas buyers of Australian property, particularly what it means for the local real estate market. There has been a lot of scare mongering in the past regarding foreign investors being responsible for the boosts in property prices across the nation, but these have been soundly rebuffed by the Property Council of Australia.

"Foreign investment puts downward pressure on house prices and helps bring on new housing construction, which increases the opportunities for Australians to get into the property market," said Ken Morrison, Property Council Chief Executive in a February 27 press release.

So if this isn't the case, then what are the restrictions going to do?

Breaking down the numbers

Under the Treasury proposal for a tightening of foreign investment guidelines, it was suggested that harsher penalties for illegal investment be introduced, as well as new fees for residential purchases. These fees total up to $5000 for any property valued at less than $1 million, which increases by $10,000 in each subsequent million dollar bracket. 

And depending on size, business investments could incur fees of between $10,000 and $100,000. More approvals must be sought, and submissions are now open on this proposal. 

What does it mean?

The idea behind this system is to tighten up foreign investment, ensuring that no illegal transactions occur. Following the Federal government's Senate inquiry into the foreign investment market, this is action to prove that steps are being taken. Moreover, the Foreign Investment Review Board will be able to track who owns Australian investment property more efficiently.

But as for direct impacts on the market, I don't see any significant changes happening. If a foreign buyer wants to make an Australian property investment these fees won't be an impediment, especially compared to the safe returns that real estate offers. 

In fact, most impediments for foreign investors are likely to be ones that affect locals too: Property prices, supply issues, finding the right home and cutting through all the red tape. These are all issues with solutions as well: Namely, finding a professional buyers' agent. 

At propertybuyer, we're Australia's most awarded buyers' advocates. We know how to find value in the market, and we can cut through the sales speak that surrounds a lot of real estate. This is likely essential if you are an overseas buyer. To find out more, you can read through our free property reports