China has become Australia’s biggest source of approved foreign investment for the first time after a $12.4 billion splurge on real estate last financial year.
Chinese investors planned to spend $27.7 billion here according to the Foreign Investment Review Board annual report, issued Thursday, overtaking United States investors who were approved to spend $17.5 billion.
Investments in real estate accounted for almost half China’s total, with its $12.4 billion approved investment more than twice the amount spent by the Americans on real estate.
The Abbott government has proposed tough new rules on foreign investment in residential property and ordered one Chinese buyer to sell a $40 million mansion that was bought illegally.
The FIRB figures tally approved investment rather than actual investment and may understate US investment due the higher threshold that exists for US investment compared with China under the existing trade rules. While China has topped the US for annual approvals, the US, Great Britain and Japan still have greater accumulated investment in Australia than China.
The statistics did not give a breakdown of the residential investments by country but did reveal the number and value of property transactions almost doubled from 11,668 transaction to 23,054 in 2013-14.
The value of proposed investment in residential real estate increased to $34.7 billion, up from $17.2 billion. Investment in newly developed homes was up 200 per cent to $25.8 billion while investments in existing homes – that can only legally be bought by temporary residents in Australia – was up 32 per cent to $7 billion.
The report showed a substantial increase in the number and value of foreign investors buying existing residential properties, up almost $3 billion. Commercial real estate investment also increased to $39.9 billion from $34.8 billion.
The government is close to finalising proposed new fees for foreign investors buying Australian property which Mr Hockey had described would “restore confidence” in the foreign investment system which had not prosecuted anyone for breaching the rules since 2006.
The proposed new rules would impose a $5000 application fee on any foreign investors looking to buy a property under $1 million, rising $10,000 for every extra $1 million in the purchase price.
There would also be a new register to track the origin of foreign investment in residential and agricultural property. If foreign investors breach the rules, the government has flagged fining them up to 25 per cent of the value of the property and forcing them to sell.
OPEN FOR BUSINESS
Treasurer Joe Hockey said the new figures was evidence Australia was “once again, open for business” after the September 2013 election of the Coalition government.
Overall, FIRB considered more than 24,000 proposals for foreign investment which was almost twice the number of the previous year. Only three proposals were rejected: two were associated with residential real estate purchases and the other the $3.4 billion takeover of GrainCorp Limited by US-based Archer Daniel Midlands.
“Since coming to government we have provided stable and consistent decision making, lowered sovereign risk by abolishing the carbon tax and the mining tax and have removed more than 50,000 pages of unnecessary regulation,” Mr Hockey said.
“The Coalition has also streamlined the environmental approval process. In 2014 we halved the time taken for final environmental approvals compared with the previous year.”
Non-real estate transaction in 2013-14 was $92.8 billion, an increase of 10.7 per cent. Foreign investment approvals in the services sector (excluding tourism) more than doubled to $53.4 billion, making it the second largest investment sector after real estate.
SOURCE: The Australian Financial Review
WRITTEN BY: Fleur Anderson