Foreign buyers have been flouting rules on buying existing dwellings in Australia, potentially boxing out first home buyers and local buyers.
A recent parliamentary economic committee report has slammed the Foreign Investment Review Board (FIRB) for failing to monitor the number of properties being bought by foreign buyers.
Currently, Australia only permits foreign buyers to buy new dwellings, but they are permitted to buy existing homes under limited circumstances.
They are allowed to buy existing homes on the provision that they sell their properties after they leave Australia.
But the review board in charge of monitoring these rules has failed to police the buying and selling of these properties.
The board approved 5,091 applications to buy existing houses last year by foreign buyers, up from 647 approvals three years earlier.
Since 2003, the board has issued just 17 orders for foreign investors to divest illegally acquired property in Australia.
The parliamentary report found that there was also a lack of data collected to track how many foreigners had purchased homes in the country, indicating that there was no way to accurately show if the situation was getting out of hand.
A recent NAB survey found that foreigners accounted for 8 per cent of demand in existing dwellings, while one in six new properties were being bought by foreign buyers.
Greek Australian real estate agent for Nelson Alexander, Spiros Karagiannidis, says he’s seeing first home buyers and locals concerned that they will be shut out of the market thanks to unregulated foreign ownership.
“It is already quite competitive out there; introducing an extra segment in the market by allowing international ownership will make it even harder for first home buyers to secure a home,” Mr Karagiannidis tells Neos Kosmos.
“Currently in the Melbourne market there’s not quite enough supply, and increasing that demand will ensure that prices will go up.”
Real estate agent for RT Edgar, Socrates Callas deals with a number of foreign buyers and says their inclusion in the market means better clearance rates for auctions and a more competitive market.
Working in the Hawthorn area of Melbourne, he’s assisted a number of foreign buyers to invest, and has seen prices skyrocket.
“We’ve sold properties $200,000-$300,000 over the reserve and that’s thanks to overseas buyers,” he says.
“They pay a lot more but if you look at it over the long term, these properties will be worth double, so it’s worth paying a little bit more and getting what you want.”
While he agrees it is slightly unfair for local buyers who are looking to pay market price, Mr Callas believes competition means houses will remain sound and lucrative investments.
“Try and stretch your budget,” he says.
In an effort to make the housing market a fairer place for all, the parliamentary economic committee report did leave the government with some suggestions.
It hopes to see the creation of a national database to track the address of every property purchased by a foreign owner and their country of origin.
It also suggested that foreign buyers be forced to pay $1,500 to put in an application to buy a properly, while real estate agents who help foreign owners circumvent laws could face criminal charges and civil fines.