Median Sydney house price tops $A1m for first time

Restrictions on foreign buyers have failed to cool the Australian housing market over the past year, particularly in Sydney and Melbourne.

New figures from the Domain Group show the median house price in Sydney rose 22.9% in the year to June to $A1,000,616 ($1,141,213)

All buyers of property in Australia also face a tax on capital gains and stamp duty.

To a degree, this is a how-long-is-a-piece-of-string debate.

Proponents of foreign buyer restrictions and taxes on property transactions in New Zealand say the Australian market would be even hotter without them.

But nevertheless, the latest Aussie stats show foreign buyer restrictions are no magic bullet.

Australia has been tightening the screws on non-resident buyers since 2010. Echoing the policy proposed by Labour, the Greens and NZ First, foreign buyers cannot buy existing housing stock (they can apply to the Foreign Investment Review Board (RIRB) for case-by-case exemptions).

The pro-restrictions camp says the Australian restrictions haven’t been adequately policed. Friends, family and shelf companies have been used to skirt the rules, and offenders have only faced a stern talking too. They can also be ordered to sell a property within 90 days.

More than 200 investigations are open, but the FIRB doesn’t have the resources (it began with only eight staff) to scrutinise every house sale. Extra resources is being thrown at the problem, but with the entire market to monitor for sneaks, the question is whether it can ever be enough.

New fines and fees
The Abbott government is introducing two measures to tighten things up from December.

Under the first measure, foreign buyers who breach the rules will face three years in jail and fines of $A127,500 for individuals and $A637,500 for companies (on this side of the Tasman, breaches of the rules being introduced in October for registering with IRD and opening an NZ bank account will incur a first-offence fine of $25,000 and a second-offence penalty of $50,000).

Third parties, including real estate agents and developers, who knowingly help those buyers will also be penalised with fines of up to $A42,500 for individuals and $A212,500 for companies.

The second measure is a new home-buying application fee that applies to non-resident buyers of $A5000 on the first million, plus $A10,000 for every extra million dollars of the purchase price.

Will those measures make non-resident buyers think twice? As in NZ, there are counter pressures, including a falling dollar that make homes more attractive to foreigners and a freeing-up of offshore investment rules for citizens in China, which one real estate agency estimates will pump an extra $16 billion into the NZ market alone.

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