Is It Time To Revisit Foreign Ownership Rules?
ANZ Banking Group is set to make further changes to their lending guidelines for investors. Their changes are set to target real estate investors using overseas funds to complete the purchase.
The AFR today reported that notwithstanding the fact that the ANZ Bank had many several changes to their lending guidelines to prevent fraud and money laundering, it appears they want to increase the level of scrutiny. They include;
- Insisting on untranslated original documentation
- Tightened passport scrutiny
- Applicants must show all pages of their passport
- Applicants with 100% foreign income will not be accepted
It is no secret that over the past few years there has been billions of dollars invested residential real estate by Chinese property investors. Property developers have made it a big part of their marketing plan to market in to China. This has been happening since former Treasurer Wayne Swan changed the ruling of foreign ownership with the Foreign Investment Review Board (FIRB) on 4/08/2009.
The Rudd government at the time decided to make changes that would allow a new property development up to 100% foreign ownership. Prior to 04/08/2009 foreign investors could only purchase up to 50% of any one development.
At the time, coming out of the horrors of the GFC, it made perfect sense to relax the foreign ownership rules as any property developer will tell you that the Australian banks were not exactly forthcoming with funds to develop. The banks that were lending at the time would want 100% debt cover in presales before they would allow a property developer to drawdown the construction loan facility.
At the time, Treasurer Wayne Swan had this to say;
Australian Treasurer Wayne Swan announced an easing of foreign-investment rules as the nation looked to reassure investors that its door was open despite recent tensions over Chinese investment.
Swan, speaking to a Thomson Reuters Newsmaker event in Sydney, said the rules would be changed to effectively fast-track investments by allowing more of them to go ahead without being vetted first by the Foreign Investment Review Board (FIRB).
"Looking forward, the investment outlook will be less bullish, as a consequence of the slower global economy," he said.
"We want to ensure Australia's regulatory framework promotes our competitiveness and attractiveness as a destination for international capital. Our mission is to compete globally more effectively, to take a larger slice of a currently smaller pie."
Maybe it is time that the FIRB ruling on foreign ownership revert back to having a 50% cap? The changes made to the FIRB foreign ownership in 2009 for brand new developments may have outlived its purpose.