The Real Estate Institute of Australia is seeking a new foreign investment fee structure for the residential property sector.
The Real Estate Institute of Australia (REIA) has fronted a Senate economics committee to give evidence on the Foreign Acquisitions and Takeovers Fees Imposition Amendment Bill 2020.
According to REIA president Adrian Kelly, fees should be structured to reflect the cost of undertaking the assessment and administration by the Australian government, instead of imposing unnecessary impediments on foreign investors in the residential property market.
Applications for foreign investment in the residential property market have significantly dropped from 40,000 in 2015-2016 to 7,500 in 2018-2019.
Over the past 25 years, Australia’s foreign investment requirements have been between 4 to 5 per cent of GDP.
“Foreign investment in the residential property market is the lowest it has been since 2015-2016,” Mr Kelly said to the committee.
“We understand from our agents working in this area the cumulative impact of Commonwealth and state government fees has contributed to decreased demand from foreign investors.
Therefore, REIA proposed to the Treasury and the Senate economics committee that fees be made equitable and reflect the cost of assessment and processing by the Foreign Investment Review Board.
Mr Kelly said that, while COVID-19 had attracted a welcome and wide-spread commitment from all levels of Australian governments to deregulate and be more business and investment-friendly, REIA was concerned that the fee-setting framework within the bill did not meet these best practice policy aspirations.
For one, the proposed fee for residential is twice that for agricultural and 50 times that for commercial land and business.
An asset in non-residential categories valued at $210 million has a proposed fee of $52,800; whereas, for a residential property, an asset valued at $5 million has the same fee of $52,800.
Further, the Productivity Commission in their 2020 Research Paper on Foreign Investment said the current fees were disproportionate to the cost of delivering the regulatory regime. For example, 2017-2018 $144 million in fees were collected yet operational costs were only $14.7 million.
“This is not just across the board but for each category of fees,” he said.
“That is, residential property applications should not be offsetting or subsidising the cost of administration in other categories… In short, unnecessary impediments should be removed for foreign investors looking to invest in Australia’s residential property market.”
“We respect all national security considerations but fees should ultimately reflect the cost of undertaking the assessment and administration.”