4 December 2014
Practice Group:
Real Estate
Investment,
Development and
Finance
Release of Report on the Impact of Foreign
Investment on the Housing Market
By Justin Lethlean, Will Grinter and Stephanie Goodlet
Summary
The House of Representatives Standing Committee on Economics (Committee) released
its report on Foreign Investment in Residential Real Estate on 27 November 2014
(Report).
As a response to concerns continually raised regarding the impact of foreign investment
on the Australian housing market, the Committee examined:
 the economic benefits of foreign investment in residential property
 whether such foreign investment is directly increasing the supply of new housing and
bringing benefits to the local building industry and its suppliers
 how Australia's foreign investment framework compares with international experience
 whether the administration of Australia's foreign investment policy can be enhanced.
Key findings
Following six public hearings and the review of 92 submissions, the Committee found
that the current Australian framework for foreign investment in residential real estate is
appropriate and strikes a balance between the need for valuable foreign investment and
ensuring that the stock of housing available to Australian citizens and residents is not
diminished.
However, the Committee was critical of the administration of the Foreign Investment
Review Board (FIRB) and the foreign investment framework and made the following four
key findings.
1. There is a distinct lack of accurate or timely data which tracks foreign investment in
residential real estate.
2. FIRB's administration and resourcing is inadequate.
3. FIRB's inability or reluctance to enforce the foreign investment framework provides
little incentive for compliance.
4. There is an underinvestment in FIRB's audit, compliance and enforcement activities,
which is arguably derived from the funding of FIRB by Australian taxpayers rather
than foreign investors.
The Recommendations
The Committee made 12 key recommendations to improve the enforcement of the
existing framework for foreign investment in the Australian housing market. These
recommendations are:
Release of Report on the Impact of Foreign Investment on the Housing
Market
1. The current framework should be retained to encourage foreign investment in new
housing and increase the supply of housing.
2. Appropriate processes for the purpose of audit, compliance and enforcement of the
foreign investment framework should be implemented by FIRB and the Foreign
Investment and Trade Policy Division of Treasury.
3. The introduction of a modest administrative fee to the current screening of foreign
purchases of residential real estate by both foreign investors and temporary residents
to assist to better resource FIRB.
4. The introduction of a civil penalty regime for breaches of the foreign investment
framework (calculated on the basis of a percentage of property value), applicable to
both foreign investors and any third party who knowingly assists a foreign investor to
breach the framework.
5. Amendment of the Foreign Acquisitions and Takeovers Act 1975 (Cth) to provide that
the existing criminal penalties for a breach of the foreign investment framework also
apply to any third party who knowingly assists a foreign investor to breach the
framework.
6. The introduction of a requirement that any capital gain from the sale of an illegally
held established property be forfeited to the Federal Government.
7. The amendment of Australia's Foreign Investment Policy to require a temporary
resident to sell any property which ceases to be a primary residence within three
months.
8. The establishment of a national register of land transfers that records the citizenship
and residency status of all purchasers.
9. Amendment of the Migration Act 1958 (Cth) to require the Department of Immigration
to inform FIRB when a temporary resident departs Australia on expiration of their visa.
10. The introduction of a requirement that all properties which have approval for off-theplan sales to overseas investors also be marketed in Australia for the same period of
time.
11. That the Government consider the purchase of residential property by foreign
investors as an area of investigation when considering amendments to the AntiMoney Laundering and Counter-Terrorism Financing Act 2006 (Cth).
12. The Treasury's Foreign Investment and Trade Policy Division should make greater
use of relevant Federal and State Government databases to assist with facilitation of
FIRB's operations.
Implications
As the Report simply presents the recommendations of the Committee, no action is
required. However, the Report provides useful information concerning foreign investment
and may form the basis of future legislative and regulatory amendments. We will continue
to monitor any implementation of the Committee's recommendations.
A full version of the Report is available here.
Release of Report on the Impact of Foreign Investment on the Housing
Market
Authors:
Justin Lethlean
justin.lethlean@klgates.com
+61.3.9640.4312
Will Grinter
will.grinter@klgates.com
+61.3.9640 .4411
Stephanie Goodlet
stephanie.goodlet@klgates.com
+61.3.9205.2160
Anchorage Austin Beijing Berlin Boston Brisbane Brussels Charleston Charlotte Chicago Dallas Doha Dubai Fort Worth Frankfurt
Harrisburg Hong Kong Houston London Los Angeles Melbourne Miami Milan Moscow Newark New York Orange County Palo Alto
Paris Perth Pittsburgh Portland Raleigh Research Triangle Park San Francisco São Paulo Seattle Seoul Shanghai Singapore
Spokane Sydney Taipei Tokyo Warsaw Washington, D.C. Wilmington
K&L Gates comprises more than 2,000 lawyers globally who practice in fully integrated offices located on five
continents. The firm represents leading multinational corporations, growth and middle-market companies,
capital markets participants and entrepreneurs in every major industry group as well as public sector entities,
educational institutions, philanthropic organizations and individuals. For more information about K&L Gates or
its locations, practices and registrations, visit www.klgates.com.
This publication is for informational purposes and does not contain or convey legal advice. The information herein should not be used or relied upon
in regard to any particular facts or circumstances without first consulting a lawyer.
© 2014 K&L Gates LLP. All Rights Reserved.