Foreign Investment Rules Set for Overhaul
This topic is controversial so we will be very careful. Let us be clear we are not anti-foreign investment altogether just anti rule breakers and regulators that do not adequately monitor or enforce the rules. Sometimes the rules just need to be changed…
For residential real estate, the Foreign Investment Review Board (FIRB) seeks to ensure foreign investment in residential property increases the supply of Australia’s housing stock. So foreign persons are generally granted approval by FIRB to acquire a ‘new dwelling’. To constitute a ‘new dwelling’ the property must be acquired directly from the developer and not have been occupied for the preceding 12 month period. Foreign persons may apply to acquire single vacant lots but the approval usually requires that person to start continuous construction of a dwelling on the land within 2 years of the approval. The same applies where the applicant wishes to acquire vacant land to develop multiple dwellings.
Foreign persons may also apply to redevelop an existing dwelling, if the existing dwelling is demolished and multiple properties constructed on the land. A ‘redevelopment’ is not a refurbishment of the existing dwelling. FIRB will only approve an application to demolish an existing dwelling and replace it with a single dwelling, if it can be established that the dwelling has exceeded its economic life as established by a report from a builder and/or licensed valuer. Approval for a redevelopment is generally granted provided that the existing dwelling is not rented out prior to demolition and that substantial construction of the new dwellings occurs within 24 months.
There are a couple of large problems here. Firstly this means lovely old character homes that significantly add to the streetscape of a suburb can be demolished if they are not considered significant enough to be listed (the vast majority).
The other issue, addressed in this SBS article, is that these foreign investment rules have not been properly enforced.
According to this source, a parliamentary inquiry report published in November 2014 found not one government sale of illegally acquired property had gone ahead since 2006, compared with 17 divestment orders from 2003 to 2007. As a result the prime minister has announced a review of foreign investment rules. Changes must be made. Click here to read more.