Australia toughens law on foreign property buyers

Illegal property buyers in Australia will face stricter penalties including jail terms under the government's new rules as confirmed by the country's prime minister Tony Abbott.

The fines and imprisonment will also apply to property dealers as well as real estate developers who assist foreign buyers.

Australian Taxation Office will enforce the new rules, which will become effective on 1 December.

While announcing the changes in Sydney over the week end, the prime minister said, "We want to ensure that illegal foreign investment is not unnecessarily driving up prices, where house prices have risen by about a third in the past three years.''

"We want to maximise the opportunities for Australians to buy a home at the best possible price," he added.

Abbot said his government is in favour of foreign investment.

"But it does have to be the right foreign investment, in the right things, and we do need to have a foreign investment review system which encourages public confidence that the foreign investment we need really is in Australia's national interest," he said.

Australian real estate market has become a hot spot for foreign buyers, particularly the Chinese who have been investing heavily in property purchases, driving prices high in cities like Sydney and Melbourne, squeezing out local buyers.

Foreign real estate purchases in the country have doubled to A$34 billion in 2013-14 compared with the previous year.

Although foreigners are currently allowed to buy only new residential properties, the government says there has been little enforcement of the rules.

Under the new rules, overseas buyers will have to pay an application fee of A$5,000 for properties worth up to A$1 million, with higher fees for more expensive properties and agricultural land and commercial properties.

Violators will now face up to three years in jail or fines of A$127,500 for individuals and A$637,500 for companies. Property dealers and agents who knowingly assist foreigners to breach the rules will also face fines of up to A$42,500 for individuals and A$212,500 for companies.

In an interview with Sky News, finance minister Mathias Cormann said Australia remained keen on foreign investment but the government has to ensure that foreign investment coming into the country is not contrary to the national interest, and therefore it has to have a framework in place that applies proper scrutiny.

Foreign investors who acquired properties illegally will be forced to sell them with fines to ensure that they don't profit, but won't face criminal prosecution.

Australian treasurer Joe Hockey said the government was already investigating about 100 illegal foreign property purchases, and foreigners who have made illegal purchases have been given a moratorium until 30 November to come forward.

Property council of Australia welcomed the ''long overdue'' crackdown on illegal property buying.