The Real Estate Institute of Australia (REIA) has welcomed changes made to the foreign investment framework that allow foreign investors to purchase off-the-plan developments that have failed to reach settlement.
Before this decision, foreign investors were only allowed to buy new properties and were restricted from buying off-the-plan dwellings that had failed in their initial settlements, as they were considered as second-hand dwellings.
“The Government has addressed an anomaly in the FIRB rules in a pragmatic way,” says Mr Neville Sanders, President of the Real Estate Institute of Australia. “It is a common sense approach to not treat a dwelling that has just been built and for which the title has not changed as an established dwelling.”
The decision follows a clampdown earlier this year by the big four banks on their lending to foreign investors, especially in China, following a number of fraudulent claims of income. This has had a large impact on foreign investment as many Chinese investors scrambled to find funding within Asian markets, which led to a number of contracts being rescinded.
The changes, wherein developers can acquire New Dwelling Exemption Certificates for foreign buyers of second-hand dwellings, have been swept through following industry input. “The Government needs to be commended in the promptness with which it responded to industry approaches on this matter. Following industry concerns the REIA first approached the Government on this issue in mid October with a result in a little over a month,” said Mr Sanders.
“This is most welcome news and will minimise the negative impact of off-the-plan sales to foreign purchasers not being completed.”
What is unknown is how this will affect national growth of project approvals and the national property market as a whole. Melbourne and Sydney have already surged ahead from the rest of the country in both dwelling prices and project approvals (the rest of Australia has seen a 7.1%pa decline in project approvals), so this announcement may help meet the demands of these two cities’ spiking dwelling prices. What may be seen from these changes is a slight evening-out of these growing differences between the east coast cities and the rest of Australia.