Australia tightens rules for foreign property buyers

Apr 25, 2010

Australia tightens rules for foreign property buyers
Sydney - Australia clamped down on foreigners buying property yesterday, after complaints that a rapid influx of Asian money had helped make its housing among the most expensive in the world.
The government reimposed tough rules relaxed in 2008 that say temporary residents need permission to buy homes and must sell when they leave the country, while foreigners investing from abroad can buy only new properties.
The rules are backed by stiff new penalties including compulsory sell orders, as well as expanded monitoring and a crackdown on real estate agents who help foreigners flout the rules.
They follow growing disquiet that ordinary Australians are being priced out of the market after a decade-long property boom that has accelerated over the past year.
'We want to make sure that Australian working families are not being priced out of their own family homes. That is why we have acted in the way in which we have done,' said Prime Minister Kevin Rudd.
'We want to make sure that foreign speculators are not going to force up prices for Australians seeking to buy their own home, buy their first home and we think this is the right course of action.'
Property experts in Singapore say that the rules for temporary residents will affect the market Down Under.


Mrs Doris Tan, managing director of Singapore's DST International Property Services, said that, with new rules in place, investors might turn to other places like London since the pound sterling is weak.'This new ruling will definitely result in a drop of property prices in Australia,' she said.
House prices have been red-hot in Australia's major cities, especially Sydney and Melbourne and also Perth, centre of the country's booming minerals exports to Asia.


Victoria state, whose capital is Melbourne, smashed the billion-dollar weekly sales barrier in March, while Rupert Murdoch's son Lachlan landed a record US$23 million (S$31.5 million) property at a Sydney auction in November.


An international survey released in January found Australia's housing was the least affordable among six advanced nations including the United States, Britain, Canada, New Zealand and Ireland.
The Australian Treasury has been reportedly investigating 50 cases of suspicious residential property purchases by foreigners in Melbourne, contributing to rising property prices.
Under reinstated regulations, temporary residents and foreign students will be screened to determine if they will be allowed to purchase a property.
Foreign residents without temporary visas cannot buy existing houses, and may buy property only if it adds to the housing stock. If buying land, they must build within two years or sell it to stop 'land banking'.Travel details and ownership data will be matched to catch cheats, and the public will have a new hotline to report foreigners they suspect of breaches.


Those leaving Australia must sell their properties and the government will claw back any capital gains made by foreign investors who breach the arrangements. Real estate agents will face new penalties under civil law.
This rule, DST's Mrs Tan said, would have a great impact on people whose children study in Australia. 'Asian parents will still buy the property for their children, to have a home away from home. Parents will now treat the money as money spent on rent and they must be prepared to sell when their children leave the country,' she said.


Australia's opposition has said foreign investors are outbidding locals at house auctions, while media reports refer to cashed-up Asian buyers snapping up homes for their children studying in the country. However experts also blame a lack of housing supply and say government handouts, including grants for first-time buyers, have inflated prices.

wise words

Investment is not about being smart or speculative, its about having the temparament and discipline

Indonesia

He noted that Indonesia was Singapore's fifth- largest trading partner, with total bilateral trade of $58.5 billion, and that the two countries had consistently been among each other's top trading and investment partners.

According to the Indonesia Investment Coordinating Board (BKPM), Singapore was Indonesia's top source of realised investment, accounting for almost US$4.4 billion (S$6 billion) last year.Mr Lim suggested that Singapore companies consider casting their nets wider when looking to invest in the country.


'While Singapore's investments have traditionally flowed into Jakarta and the Batam-Bintan region, companies have also recognised the potential of the larger Indonesian market and have invested in other regions of Indonesia in recent years,' he said.


He cited two companies that have successfully done so - Keppel Land, which has developed a retail mall in Surabaya, and Killiney Kopitiam, which runs several outlets in Medan.Each of Indonesia's regions, he added, offered different business opportunities for companies here.


Urbanised cities such as Jakarta, Surabaya and Bandung are ideal for food and beverage, retail, telecommunications, banking, real estate, and logistics industries.And resource-rich cities such as Balikpapan and Makassar have growth potential for downstream products and services, including engineering, logistics, processing, hospitality and urban infrastructure.

Indonesia may let foreigners own property

Apr 1, 2010

Indonesia may let foreigners own property (Move to boost foreign investment in S-E Asia's biggest economy)
By Salim Osman, Indonesia Correspondent
JAKARTA: Foreigners may be allowed to own apartments and even commercial property in Indonesia under a revised rule expected by the third quarter of this year, Indonesia's investment chief said yesterday.


The move is likely to draw investors into South-east Asia's biggest economy and increase the flow of foreign capital into the country.'The government is committed to continuously review policies to make it easier to invest in Indonesia,' said Mr Gita Wirjawan, chairman of the National Investment Coordinating Board, at a forum in Singapore yesterday.


'I am optimistic that once we can be seen to be taking steps in the right direction, we'll be able to reach a 15 per cent increase in foreign investment over last year's US$14 billion (S$19.6 billion).'His remarks were welcomed by property market watchers and expatriates in Jakarta. It was the clearest indication yet that the government was relaxing the rules on foreign ownership of property in the country, they said.


The move also comes at a time when improving fiscal stability could earn Indonesia an investment grade sovereign rating within a few years, according to Bloomberg News.
At present, foreigners can only buy property in Indonesia through a nominee or local Indonesian firm, putting the buyer at risk.


Foreign companies are not allowed to own property. They only have the right to use land for a period of 25 years, which is renewable, and the right to lease buildings.
'The thinking is, anything above a certain floor, you can buy... anything closer to the ground has political sensitivity,' Mr Wirjawan said in an interview with Reuters.


Analyst Willson Kalip, the country head of Knight Frank Indonesia, told The Straits Times that the move to invite foreign participation in the property market will be seen as a positive gesture. The property market has always been geared to meet domestic demand, he said.


'It will be a boost as already foreign investors from China, Singapore and Malaysia have shown interest in buying office space for their longer-term investments,' he added.
Long-term resident Michael Tan, a Malaysian, told The Straits Times that the new rules on property ownership would be an incentive for expatriates like him who have always looked forward to owning their own homes in Indonesia.


Foreign companies like his can own property, but the ownership is considered as hak pakai - the right of use - or hak sewa bangunan - the right of a building lease. 'What we need is hak milik, or right to own,' said Mr Tan.
Asian residential property prices have been booming on strong investor interest and low interest rates, leading to fears of bubbles in some countries.
Mr Wirjawan said Jakarta condominium prices were undervalued compared to Singapore and Vietnam's Ho Chi Minh City.
'Investors are optimistic about Indonesia relative to, say, Thailand and Malaysia,' said Mr Colin Tan, director of research and consultancy at Chesterton Suntec, a real estate advisory firm, according to Reuters.


'If you open a new channel for investments, some money will definitely come in... It can only be good for Indonesia's property market.'