Beware of pitfalls in Australian property buys

MANY investors who venture into the Australian property market for capital growth, yield, lifestyle, migration or educational purposes tend to buy brand new properties. One could be forgiven for thinking that this is because the market perceives "newer is better" - and this is what the Asian market wants to buy when they think of Australian property.

However, the real reason - which is not always made clear and apparent when developers sell properties off plan to non-Australians - is that non-Australian residents cannot buy property in Australia without the approval of the Australian Foreign Investment Review Board.

Currently all foreign investment in Australia is governed by the Foreign Acquisitions and Takeovers Act (Cth) 1975. The Foreign Investment Review Board (FIRB) monitors the flow of foreign investment into Australia. A recent Parliamentary Committee Recommendation to the Australian government has sought tightening of FIRB powers, amongst other things, to ensure that overseas buyers are purchasing Australian property in compliance with Australian Laws. Recommended sanctions include giving the government the power to compulsorily acquire and sell any property owned that is in breach of the law (eg a non-Australian buying resale property), to keep all capital gains and profit, as well as increased fines.