Australia imposes fees on foreign real estate buyers

Chinese and other foreign nationals buying residential real estate in Australia face additional fees as the government in Canberra seeks to curb soaring property prices and illegal home buying.

Australian Treasurer Joe Hockey said on Wednesday that the program will mean fees of A$5,000 ($3,940) for homes valued under A$1 million and they will increase by A$10,000 for each additional A$1 million.

The move is expected to raise A$200 million a year, which will help fund stronger enforcement of the country's foreign investment laws.

In addition, foreigners found to have bought property illegally will be fined as much as 25 percent of the value of the property, said Hockey.

The measures come amid concerns that foreign buyers have inflated property prices and made housing unaffordable for ordinary Australians.

Figures published earlier this month by property consultant CoreLogic RPData showed home prices in Melbourne up 7 percent last year and those in Sydney surging 13 percent.

Much attention has been focused on Chinese homebuyers amid the spike in prices. According to Australia's Foreign Investment Review Board, in 2013 China was the top source of foreign investment in real estate with A$5.92 billion, of which A$1.96 billion was in residential real estate.

Australian Prime Minister Tony Abbott said the issue was that the rules, where foreigners can only buy new residential property and not existing property, have not been enforced in recent years.

"The idea is not to deter foreign investment; the idea is to ensure that the rules are enforced," Abbott said.

Australian real estate firm Domain Group said Sydney recorded its highest auction clearance rate of 84.6 percent with more than 600 properties under the hammer on Saturday.

The rush to secure a heritage-listed house in the Roseville suburb of Sydney led two separate Chinese buyers to knock on its door with competing bids of A$4.75 million and A$4.8 million, reported the Sydney Morning Herald.

Ahead of the announcement of the new measures, international purchases of Australian real estate were forecast to grow 15 to 20 percent in 2015, according to China's largest international property website, Juwai.

Lu Ming, research manager at Cushman and Wakefield, said that tougher enforcement of the foreign investment laws is good for the Australian government, but the new measures are unlikely to have a big effect on Chinese buyers.

"Chinese buyers who are willing to fork out a few million Australian dollars for a home are unlikely to be deterred by a few thousand dollars in extra fees," said Lu. "Chinese demand for Australian property will continue to rise in 2015."