Foreign Investment Discussion Reaches High Point

There’s been a fair amount of discussion about offshore homebuyers in recent months. Whatever side you fall on, if you’re applying for a home loan, the government’s recent changes to the foreign investment policy framework is sure to interest you. Prime Minister Tony Abbott and Treasurer Joe Hockey have announced a tighter system of regulation, which will likely have wide-reaching results – especially for the residential real estate market.

Strengthening the framework

Foreign buyer activity in the property market has been heating up of late. The Foreign Investment Review Board Annual Report 2013-2014 found that approved investment in the real estate sector across the country has soared to new heights. Overseas buyers poured $34.7 billion into the residential market alone in 2013-2014, a massive rise from $17.2 billion recorded in the year prior. Sydney has been a particular hotspot. A survey from CBRE uncovering that the Harbour City is the fourth most attractive real estate investment destination in the world, ahead of heavyweight New York.

Mr Abbott pointed out that overseas buyers will continue to support the national economy. Above all, he said the government’s policy structure is intended to boost the country’s housing stock, but it needs to take a firmer approach to non-compliant buyers.

As such, it has introduced much stricter penalties for foreign purchasers who break the law, which could mean a $127,500 fine or three years imprisonment for law-breaking individuals. Offshore investors will also need to pay a $5,000 application fee for residential properties valued at $1 million or less – but this hasn’t been welcomed by all parties.


Many commentators believe that demand from cashed-up foreign nationals is pushing local buyers out of the market and adding further fuel to house prices. On the opposite side of the fence, observers have highlighted just how important these investors are to the national economy.

The Property Council of Australia falls in the latter camp, strongly advocating for continued support for foreign investment. Rather than make homes more expensive, it points out that offshore investment is actually adding to the supply of homes, helping local buyers get their start in the property market.

“Every newly constructed home that a foreign investor purchases enables up to four other homes to be built, so this boost is good news for affordability,” Chief Executive Ken Morrison said in an April 30 release.

However, in a May 4 statement, Mr Morrison said raising the fee puts all this good work at risk – and could encourage state governments to take a harsher approach to these buyers, as well.

“We welcome the government’s clamp down on illegal activity, which is long overdue,” Mr Morrison said.

“However, the government is undermining its own aim of making homes more affordable by simultaneously penalising legitimate foreign investment in new housing.”

Only time will tell how much of an impact this decision will have on the property market, but when applying for a home loan, it pays to keep one eye open. In the mean time, make sure to speak to our team of home loan professionals at Police Bank – they can guide you smoothly through the application process.