JOURNALIST:
Senator, why was it necessary to tighten the foreign ownership rules relating to domestic property?
NICK SHERRY:
Well, today I'm announcing a tightening of the foreign investment requirements in respect to residential property for temporary entrants including those on a visa class.
The three major changes are: there'll be a requirement for pre-screening; notification to the Foreign Investment Review Board. Secondly, when a temporary entrant leaves the country they will now be required to sell that property back into the Australia housing market. And thirdly, in the event of vacant land they will be required to build within 24 months and if they don't they will then have to sell the land back in to the market.
There is also a very tough new package of compliance, enforcement and particularly tough new civil penalties that will be introduced in the event of breach of these new rules that are being announced today.
JOURNALIST:
Why are they necessary?
SHERRY:
Well, what's occurred over the last 18 months - there were some changes at the end of 2008 - the Australian economy compared to other economies has remained strong. Our property market has remained strong in particular. And it hasn't collapsed like many other comparable countries.
As a consequence there is considerable interest - as a consequence of the Australian economy - in investment in Australia and we've, and I in particular have carefully listened to and there has been so... there have been anecdotal reports and we've responded to the concerns that have been expressed.
But it's particularly the ongoing strength of the Australian economy, property market, which has made Australia a very attractive place to invest and in this case with the factor of international demand in investment, it is important that in this case priority is given to Australian investors in real estate rather than the foreign investors, temporary or otherwise.
JOURNALIST:
So, in layman's terms, Australians are being priced out of the market?
SHERRY:
No, I don't - I don't accept that the factor of overseas purchase has, in itself, been a major factor. It may have been a contributing factor, and certainly there are anecdotal concerns in the community to which we are responding.
But there's a precautionary principle here. Given Australia's level of attractiveness for foreign investment generally, but particularly in respect to residential property, I think it is very reasonable.
The underlying principle for investment, where it occurs, in residential property in Australia is to add to - to create new housing stock. That is the underlying principle and that's the underlying principle for these changes announced today.
JOURNALIST:
Was one of your major concerns that some visitors were stockpiling properties against the rules? And is there ever ... any evidence of that and will you go back and examine that and see if that has been happening?
SHERRY:
Land banking, as it's called, could occur and these rules today will prevent that from occurring because a temporary entrant, if they purchase land, have to build on it within 24 months.
JOURNALIST:
No, no, I'm not talking about land banking. I'm talking about people coming in and buying more properties than they're entitled to. Stockpiling a number of properties.
SHERRY:
Well, land banking is part of stockpiling either property - residential property or land accumulation. But we believe that these new rules - the requirement to divest - the requirement to sell on leaving Australia ensures that that will not occur.
JOURNALIST:
What affect will this have on those who have been buying properties over the last 18 months?
SHERRY:
Look, it's commonly accepted in Australia that you don't make rules retrospective and that will not be occurring in this case.
JOURNALIST:
But will you ...
JOURNALIST:
Is this an admission that your original changes were a mistake?
SHERRY:
Well, as I've already explained, we've looked very long and hard at the impact of the financial and economic crisis on the Australian economy and the fact is Australia, compared to other economies, has done very well. Our property market has held up, unlike in most other comparable economies. And taking those factors into consideration over the last 18 months, since the changes made at the end of 2008, we believe these are appropriate measures that are being announced today.
The other critical issue is that I've had a long, hard look at the compliance regime and the penalties and I have to say that the compliance regime and penalty regime going back over the last 10 to 15 years has bee inadequate. It has been inadequate. And that's why we're announcing significant, major and much tougher compliance and checking and new penalty regimes today.
JOURNALIST:
'Cause you haven't had any reporting for foreign investors over the last 18 months, have you?
SHERRY:
Well, one of the new measures today is screening and reporting. That will occur going forward.
JOURNALIST:
The Opposition wants you to go back and check to make sure that no-one's been flouting the rules. Will you have an inquiry into what's gone on over the past 18 months?
SHERRY:
Two points. Firstly, why didn't the Opposition ensure an adequate compliance regime when they were in Government? As I've already said, I've looked very thoroughly at the compliance regime, the checking regime. We didn't ever have data-matching, we didn't have tough penalties that clawed back capital gains on - in the event of breach. We didn't have those features in the compliance regime going well back to their term in government. So that's the first thing the Opposition should think about.
But secondly, Mr Hockey should check with Mr Abbott because when Mr Abbott was asked about this issue approximately two weeks ago, Mr Abbott wasn't concerned and his basic approach was let it rip.
JOURNALIST:
Do you think that house prices this - these changes today will help keep house prices at a more affordable level for Australians?
SHERRY:
Look, in themselves, as I've said, we've taken a precautionary principle. I don't believe they are going to have a major impact in the housing market in Australia but we're taking the precautionary principle. We're taking the precautionary principle here.
There are a - a considerable range of other factors that impact on housing prices. Land shortage, the underlying strength of the Australian economy. They are major contributing factors.
But in itself, we're being precautionary and we want to minimise any factors within our influence.
JOURNALIST:
But there's enough of a problem. There must be enough of a problem, now, for you to take this action. You must be concerned that it's having enough of an impact to warrant you stepping in. So what do you think the impact has been on the housing market?
SHERRY:
Well I've already identified, um - in taking a precautionary approach - we've identified the underlying strength of the Australian economy since the rules were changed in late 2008. The fact is the Australian economy, of advanced economies, didn't have a recession, ah, it didn't have a recession, our property market did not collapse like many other advanced economies. So we are keen to identify those factors that may, in this case, may influence property prices. And to ensure that the emphasis going forward is wherein foreign investment occurs in residential property it is to add to housing stock.
JOURNALIST:
How do you think it now looks, though, for those wanting to invest in the Australian market? Is Australia sort of saying, well, we're not welcoming foreign investment?
SHERRY:
Not at all. Look, I think this is a package that is fair and balanced. It's fair and balanced, and it puts the interests of Australian, Australians, ahead of foreign investment, in respect to our residential property market. I believe that's appropriate. Um, and I believe that will be understood in other parts of the world.
JOURNALIST:
When did you make the, when did the government make this decision?
SHERRY:
Well I'd been consulting over the last six months, with a considerable range of people, um, economic, finance, real estate, and we made the decision last week, and it's being announced today.
JOURNALIST:
Why did you decide to announce it late on a, very, very late on a Friday afternoon, thirty-six hours after the, after Australian sport's biggest ever scandal?
SHERRY:
Look, that really had absolutely nothing to do with it. We've been working on these changes, the details of these changes, for the last six months, and finalised it last week. That had absolutely nothing to do with it.
JOURNALIST:
Can you tell us exactly when you made the decision last week?
SHERRY:
Ah, it would have been Thursday-Friday.
JOURNALIST:
So is there - in terms of the scope of the enquiry, then, um, with the scope of having a look at some of the cases that you're concerned about - there's just thirty or forty I understand? And then ...
SHERRY:
There is an examination by FIRB of fifty, fifty cases. That is still ongoing. But what struck ...
JOURNALIST:
When does that report back?
SHERRY:
Um, that will be in the next couple of weeks. But what struck me, in particular, at looking at this issue in the last six months, was the inadequate compliance and enforcement regime going back many, many years. And the compliance regime being announced today is very tough. It's far tougher than Australia has ever had. Claw back of capital gain, for example, is a severe penalty in the event of breach. And we're adding to that, we're adding to that fines as well, in addition to the criminal sanctions that will continue. Um, so, as I said, I was struck by the fact that the compliance regime - going back many, many years - was simply not adequate, and that is a major part of this new package, a much tougher compliance. Checking, for example - against the Department of Migration - the visas. Checking the visas. Making sure that property is sold when a person, a temporary entrant leaves Australia. That hasn't been occurring in the past, ever, and it will be occurring when these changes are implemented.
Thanks very much. Thanks guys.