The Australian government has announced plans for a range of fees and penalties to deter foreign property buyers after Sydney’s property prices rose 14% in 2014. Chinese buyers were singled out in complaints that foreign investors were pricing Australians out of their own property market.
Among the proposals outlined by Prime Minister Tony Abbott was a suggestion that foreign investors would have to pay an application fee of $5,000 before buying any property worth less than $1m. Purchases of more than $1m would incur a $10,000 fee for every further one million Australian dollars in value.
If they are found to be in breach of the rules, foreign investors may be fined 25% of the value of their property and could be forced to sell up.
Transactions involving Chinese buyers rose by over 60% in Australia last year, as the boom in China’s domestic construction and property market led to an overflow of capital overseas. Chinese investors have looked to invest their money away from the mainland following concerns that 3.4 billion homes have been built in a country with a population of 1.3 billion people. Hong Kong and Singapore have recently introduced similar property taxes as a result of aggressive investment from the Chinese mainland.
With all this in mind, Mr Abbott conceded that there was not enough data to conclusively blame price rises on foreign investors. However, he’s ruled out a review of Australia’s negative gearing rules, whereby an investor can claim tax deductions if an investment generates negative cash flow.