Real estate purchases by foreigners

Immigration numbers are too high, straining Sydney and Melbourne’s infrastructure and pushing up house prices beyond the reach of average Australians, former NSW Labor premier Bob Carr recently told The Australian.

“If you jam more people into Sydney, then they will get spikes in land and housing prices. We are stoking demand,’’ he said.

Are the estimated 50,000 foreign settlers a year in NSW responsible for the doubling of house prices in Sydney since about early 2000? The population of NSW is close to 6 million.

The reality however is that prices of residential real estate in some of Australia’s biggest cities, such as Sydney and Melbourne, have soared in recent years with the market in Sydney apparently spiking 15 per cent over the last year.

The Coalition government is not particularly concerned about the migration numbers as the cause. Instead it is targeting overseas investors – not the new residents- as the potential source of this unprecedented demand for housing given that some analysts have pointed to cashed-up Chinese investors fleeing the Chinese government crackdown on graft as one reason for the interest in the safe haven of the Australian economy and its property market.

Treasurer Joe Hockey recently announced that he will widen a probe into the illegal buying of residential property by foreigners, with almost 200 sales being investigated for breaching investment rules.

“The Australian Taxation Office is using all the resources of government to fully investigate any suggestions that come forward that a foreign person has unlawfully purchased real estate in Australia,” Hockey said, with 60 officials on the case.

“This is the tip of the iceberg. The data-matching powers of the Australian Taxation Office are formidable. And they will give us the power to look right across the system.”

The treasurer added that the widening inquiry spanned the breadth of the market, from properties valued at Aus$300,000 to more than Aus$40 million.

“The Australian Taxation Office is finding increasingly that there is a likelihood of taxation fraud, as well as unlawful purchase of real estate by foreign entities,” Hockey told reporters.

Foreign investors who have bought illegally have a moratorium until December 1 to come forward, with Hockey adding that 24 of the cases being examined involved voluntary disclosures by buyers.