Whilst the proposed (and extremely modest) application fee of A$1500 may have attracted political attention and initial media commentary yesterday for the report of the House of Representatives Economics Committee, the two most interesting aspects of the committee's recommendations are those relating to data collection and an enforcement regime.
With the increasing co-operation of state land registries and the development of a national e-conveyancing platform over recent years, the development of a national register of land title transfers that records the citizenship and residency status of all purchasers of Australian real estate is an achievable initiative.
It would provide increased transparency in relation to foreign investment in real estate through the provision of timely and reliable data.
Such a national register, if designed and scoped with appropriate vision and input from key stakeholders at the outset, could have a much broader potential application than just measuring foreign investment, recognising the size and importance of residential real estate to the Australian economy and Australians' wealth and prosperity.
The Report notes that the lack of timely, accurate and reliable data, along with the modest financial resources made available to FIRB, have inhibited the effectiveness of the compliance and enforcement regime administered by FIRB.
Recognising the increased financial resources available from the proposed $1500 application fee (if introduced), the committee recommended the government introduce a civil penalty regime for breaches of the foreign investment framework.
Features proposed include:
- financial penalties to calculated as a percentage of the property value, rather than restricted to $85,000 as is currently the case; and
- applying the regime to both foreign investors and any "third party" who knowingly assists a foreign investor to breach the framework.
The latter has broad potential application and will be a closely watched development.
It has the potential to extend to real estate agents, banks facilitating the flow of purchase monies from offshore, banks providing mortgage finance and even conveyancers and legal professionals.
Hopefully the recommendations in the report will not be viewed as a deterrent to continued foreign investment in the Australian housing market.
Residential construction activity is a key contributor to Australia's economic growth, with housing starts in 2014 now approaching 190,000 units.
*Craig MacKenzie is CoreLogic RP Data's executive general manager commercial.