Australia's crackdown on foreign property buyers reaps results

[PERTH] A crackdown on foreign investors who breach Australian law barring purchases of existing homes is reaping results a month after new penalties and a temporary moratorium were announced, the government said on Tuesday.

House prices in Sydney, Australia's biggest city, have soared 40 per cent in three years, fuelled by interest rate cuts to historic lows.

Chinese investors are keen buyers and China overtook the United States to become the largest source of foreign investment in Australia last year, driven by a surge in real estate buys.

The Foreign Investment Review Board is investigating 195 cases of purchases by foreign investors, which include 24 cases of those who voluntarily flagged their own possible breaches, Treasurer Joe Hockey said in a statement.

Tip-offs from members of the public, suspicious that properties had been purchased illegally using shelf companies and illegal leasing arrangements to hide foreign ownership had led to 40 of the cases under investigation, Mr Hockey added.

"Foreign investors who think they may have broken the rules should come to us before we come to them," he said.

Last month, in a bid to cool soaring property prices, the government announced penalties, such as hefty fines and prison terms of up to three years, for foreign investors illegally buying properties in Australia.

The new stronger punishments come in response to growing foreign investment in Australian real estate and evidence of abuse of current laws that prevent foreign buyers from purchasing existing homes.

Buyers who come forward before November 30 will be forced to sell properties, but will not face criminal prosecution.

This year, Hockey ordered the Chinese owner of a A$39-million Sydney harbourside mansion to sell the property within 90 days, saying it was bought illegally via a string of shelf companies.

To increase housing stock and spur investment, Australia permits offshore buyers to purchase new homes and apartments.

REUTERS