FIRB “asleep at the wheel” on property investment

Despite clear rules and clear prohibitions, the Foreign Investment Review Board had failed to enforce laws restricting investment in real estate by foreign investors, Kelly O’Dwyer maintains.

The prominent Coalition MP Kelly O’Dwyer, currently chairing a federal inquiry into housing affordability and foreign ownership, told 2GB Money News the FIRB had been “asleep at the wheel”.

“There has been not one prosecution since 2006,” she told 2GB’s Ross Greenwood, adding to earlier comments made at forum hosted by Bloomberg News in Sydney on Tuesday.

O’Dwyer, who is due to provide the report with recommendations to Treasurer Joe Hockey in October, says the committee is looking at stiffer and wider penalties for non-compliance.

“The FIRB haven’t been properly doing the job they were supposed to do in terms of the compliance and enforcement regime.”

Adding that if foreign buyers feel there is no penalty for non-compliance, “then they are going to take the risk because the upside is so large.”

“They can keep the windfall gain they might make.

“Why should some one who has done the wrong thing benefit financially?

“We are looking at a civil penalty regime that would apply to people who contravene the rules,” she said.

She said the committee was told some foreign buyers viewed the potential of the current fine, of $85,000, as potentially merely the “cost of doing business”.

“I should hurt if you do the wrong thing,” she told 2GB, adding the committee was looking at introducing fines on a sliding scale based on the property price.

“At the moment the only penalty is on the purchaser, but we need to catch estate agents, lawyers and accountants involved in trying to contravene the foreign investment laws.”

The FIRB testified to the committee that it had only eight staff dedicated to reviewing thousands of foreign purchases of residential real estate.

This article originally appeared on Property Observer.