One of the China’s richest men is the first foreigner to feel the fury of the Australian government for allegedly flouting Australian property buying rules.
The Australian government has asked 55-year-old Hong Kong property developer Hui Ka Yan – the 15th wealthiest person in China – to sell a Point Piper mansion in Sydney within 90 days, or face repossession by the Commonwealth Department of Public Prosecutions.
Yan had bought the harborside mansion Villa Del Mare for A$39 million (nearly US$30.48 million) last year. It is alleged that the company that bought the mansion was registered in Australia, but was actually owned by Yan. The company allegedly did not seek permission from Australia’s Foreign Investment Review Board (FIRB) before the purchase, as required.
The deal hogged headlines when its purchase price set a new record. Before this, another Chinese billionaire had bought a mansion in the same neighborhood for A$32 million (US$25 million).
Treasurer Joe Hockey said, “I made this order following advice from the Australian Government Solicitor that the purchase breached the law.” The Treasury are believed to have questioned the agents who brokered the deal.
After issuing the order against Yan, Treasurer Joe Hockey said that the government would investigate all realistic evidence of illegal foreign purchases of real estate, having received scores of tipoffs from around the country.
The government did not want to “create an atmosphere of xenophobia,” said Hockey, but he wanted “any Australian who goes to an auction to know they are competing on a level playing field”.
The order has come close on the heels of Prime Minster Tony Abbott making public the government’s plan to impose strict penalties on foreign buyers found flouting the property buying rules in Australia.
A foreign investor buying Australian property worth up to A$1m ($785,000) will have to pay a A$5,000 (US$3,906) application fee to the Foreign Investment Review Board (FIRB).
For properties over $1m, it will be $10,000 (US$7,812) for every extra million dollars in the purchase price. Anyone breaking the law will be fined up to 25% of the value of the property and forced to sell it.
The fee is likely to raise nearly A$200 million (US$157 million) a year, according to Hockey.
“We need to make sure that all foreign investors are following the rules, and that those foreign investors who break the rules are not able to profit from breaking the law,” Abbott said.
The growing number of foreign buyers has been in the public eye recently. It was recently revealed that since 2006 there have been no prosecutions by the FIRB of foreign property buyers, although many foreign nationals have been found to have broken the rules.
There are already many restrictions on foreign buyers in Australia:
- All non-residents must obtain permission from the FIRB before buying residential property in Australia.
- They are not allowed to buy an established (previously occupied) house.
- They may buy an unoccupied new dwelling, but only if the FIRB feels that the purchase will not add to the shortage of properties available to native Australians.
- Temporarily establishing residence in Australia for the purpose of buying a house is not a viable alternative to obtaining FIRB permission, since temporary residents must sell their property if they leave Australia.