The federal government has been accused of solving a problem that doesn’t exist after announcing a crackdown on foreign buyers.
The government proposed on Wednesday to introduce a range of new fees and penalties that would make life harder for foreign investors in residential real estate.
Overseas buyers are likely to feel affronted by the reforms, according to Simon Henry, the co-chief executive of Juwai, a listings portal for China-based real estate investors.
“The proposals say to foreign buyers, 'We don’t want you and we won’t treat you fairly’,” Mr Henry told Mortgage Business.
“This is basically a $200 million stamp duty for offshore buyers, and stamp duties discourage investment.”
Parties who breach the government’s proposed new rules could face a range of penalties, including fines of up $85,000 and two years’ imprisonment.
“We don’t believe the penalties will have much impact, because we don’t see any firm evidence of foreign buyers abusing the rules,” Mr Henry said.
“What the penalties really do is set a tone and say to foreign buyers that Australia doesn’t like them very much, even though they are key to new residential construction and the resulting jobs, taxes, agent commissions and new housing supply."
The government also wants to introduce fees on applications for residential real estate.
The proposed fees would be $5,000 for properties valued at less than $1 million and $10,000 for properties between $1 million and $2 million, with fees then rising in $10,000 increments for every $1 million extra of value.
Mr Henry said although the fees aren’t high, the government is wrong to want to charge them every time a buyer applies for permission to buy a property.
“You may bid for five, 10, even 15 properties and lose out to other buyers every time, but you’ll still pay a fee on every one. That is not fair and it discourages foreign buyers and sends them to other shores,” he said.
Real Estate Institute of Australia chief executive Amanda Lynch broadly welcomed the government’s aim to strengthen compliance.
However, she warned that the fees might make Australia less attractive to foreign investors.
The UK, the US and Canada don’t have application fees, while Switzerland and Austria have lower fees than those proposed by the government, Ms Lynch said.
“In setting the fee level for Australia, REIA encourages the government to consider the equivalent global rates and not discourage foreign investment that has been proven to increase the supply of new housing at a time of a severe shortage,” she said.