July 18, 2015 Lucy Macken, Domain Prestige Reporter
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A little-known loophole in foreign investment laws means government-owned property can be sold to foreign investors without the need for approval from the Foreign Investment Review Board.
As the state government ramps up its sell-off of state-owned property, questions are being raised about the exemption. Close to $1 billion worth of state-government owned property has been sold off in the past two years, since the establishment of Government Property NSW.
Foreign investment rules do not allow non-residents to buy established dwellings, however a spokesperson for Treasury confirmed that any sales by local, state and territory governments are exempt from requiring any buyer approval because they should "be able to deal with their assets without interference".
"That's a big gap in the market for foreign buyers to take advantage of if they want to buy into the established housing market," said lawyer Marcus Clark, a partner at Allens
Industry experts say it is surprising that few foreign buyers have taken advantage of the exemption, particularly in the case of Millers Point, where the state government is part-way through the sale of 293 historic homes.
Of the 21 of the historic houses sold to date for a total of $46.6 million, all have been bought by locals.
That lack of foreign buyer interest in Millers Point hasn't eased the concerns of local residents.
"The whole rationale behind the sale of these houses was that the government couldn't afford to restore them, and by selling them off to private hands that would pay for the necessary restoration and maintenance costs," said resident and member of the local public housing tenants group Barney Gardner.
"Our concern is if these houses are bought by speculative investors or foreigners "land banking" the properties then the government's heritage concerns won't be addressed anyway."
The National Trust advocacy director Graham Quint has weighed into those concerns of land banking and speculative investment sales to urge the government to return to the former practice of offering the homes on 99-year leases.
"This is prime real estate and the oldest surviving suburb in Australia so it makes sense to keep the properties as leasehold homes to ensure tighter controls on the work being done and when," said Mr Quint.
One of the first state-owned houses that was last August for $1,911,000 was resold last month by the Sfeir family for about $2.5 million after a few minor cosmetic changes. The sale was not intended to be flipped for profit, but relisted after the City of Sydney Council ordered the owner to cease renting part of the property as an Airbnb.
That property is one of two heritage-listed houses sold by the government to be issued with stop-work notices by the City of Sydney Council because of unauthorised building work.
A Government Property NSW spokesman said "any decisions relating to Australia's foreign investment policy are a matter for the federal government".
Lawyers said the exemption has been part of the Foreign Acquisitions and Takeovers Act since it was enacted in 1975.
The federal government is currently undertaking a modernisation of the act.
"The government has been consulting on its plans to strengthen the foreign investment framework and welcomes public submissions on the regulations," said the Treasurer's Parliamentary Secretary Kelly O'Dwyer.
Although individual foreign buyers do not need approval to buy government owned property, Ms O'Dwyer said foreign governments still needed approval.
Of the 10 big-ticket property sales by Government Property NSW, the most recent was historic Bidura House in Glebe, which sold late last year for $33,006,000 to developers Lina Jin and Yuelai Zhou, whose previous projects include duplexes for more than 500 families in Shanghai and a five-tower project in Huangzhou.
RESOURCED: http://news.domain.com.au/domain/domain-news/the-real-estate-loophole-foreign-buyers-have-not-yet-exploited-20150717-giefn9.html
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| The historic Bidura House in Glebe sold late last year for $33,006,000 to Chinese developers Lina Jin and Yuelai Zhou |
A little-known loophole in foreign investment laws means government-owned property can be sold to foreign investors without the need for approval from the Foreign Investment Review Board.
As the state government ramps up its sell-off of state-owned property, questions are being raised about the exemption. Close to $1 billion worth of state-government owned property has been sold off in the past two years, since the establishment of Government Property NSW.
Foreign investment rules do not allow non-residents to buy established dwellings, however a spokesperson for Treasury confirmed that any sales by local, state and territory governments are exempt from requiring any buyer approval because they should "be able to deal with their assets without interference".
"That's a big gap in the market for foreign buyers to take advantage of if they want to buy into the established housing market," said lawyer Marcus Clark, a partner at Allens
Industry experts say it is surprising that few foreign buyers have taken advantage of the exemption, particularly in the case of Millers Point, where the state government is part-way through the sale of 293 historic homes.
Of the 21 of the historic houses sold to date for a total of $46.6 million, all have been bought by locals.
That lack of foreign buyer interest in Millers Point hasn't eased the concerns of local residents.
"The whole rationale behind the sale of these houses was that the government couldn't afford to restore them, and by selling them off to private hands that would pay for the necessary restoration and maintenance costs," said resident and member of the local public housing tenants group Barney Gardner.
"Our concern is if these houses are bought by speculative investors or foreigners "land banking" the properties then the government's heritage concerns won't be addressed anyway."
The National Trust advocacy director Graham Quint has weighed into those concerns of land banking and speculative investment sales to urge the government to return to the former practice of offering the homes on 99-year leases.
"This is prime real estate and the oldest surviving suburb in Australia so it makes sense to keep the properties as leasehold homes to ensure tighter controls on the work being done and when," said Mr Quint.
One of the first state-owned houses that was last August for $1,911,000 was resold last month by the Sfeir family for about $2.5 million after a few minor cosmetic changes. The sale was not intended to be flipped for profit, but relisted after the City of Sydney Council ordered the owner to cease renting part of the property as an Airbnb.
That property is one of two heritage-listed houses sold by the government to be issued with stop-work notices by the City of Sydney Council because of unauthorised building work.
A Government Property NSW spokesman said "any decisions relating to Australia's foreign investment policy are a matter for the federal government".
Lawyers said the exemption has been part of the Foreign Acquisitions and Takeovers Act since it was enacted in 1975.
The federal government is currently undertaking a modernisation of the act.
"The government has been consulting on its plans to strengthen the foreign investment framework and welcomes public submissions on the regulations," said the Treasurer's Parliamentary Secretary Kelly O'Dwyer.
Although individual foreign buyers do not need approval to buy government owned property, Ms O'Dwyer said foreign governments still needed approval.
Of the 10 big-ticket property sales by Government Property NSW, the most recent was historic Bidura House in Glebe, which sold late last year for $33,006,000 to developers Lina Jin and Yuelai Zhou, whose previous projects include duplexes for more than 500 families in Shanghai and a five-tower project in Huangzhou.
RESOURCED: http://news.domain.com.au/domain/domain-news/the-real-estate-loophole-foreign-buyers-have-not-yet-exploited-20150717-giefn9.html
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