With such a strong demand for Australian property from foreign investors, sellers need to protect themselves to avoid getting embroiled in potential debacles.
Residential property prices are being driven up by a new wave of foreign investors and expats seeking superior returns, financial stability, and a safe haven from unstable global markets. Unfortunately, not all the foreign capital finding its way into the country is entering legitimately.
According to the Australian Transaction Reports and Analysis Centre (AUSTRAC), the number of suspicious money transfers into Australia over the past two years has jumped 300%. This percentage includes the billions of dollars in suspicious money transfers from China that have entered Australia over the past 12 months.
The spike in possibly illegal money transfers coincides with the crackdown by local banks, which prevented overseas investors from raising cash through legitimate channels.
According to data obtained by the Australian Financial Review
, sellers of 46 prime Sydney and Melbourne residential properties have been forced to divest deals worth almost $100m in recent years because the transactions breached FIRB rules. Hundreds of other similar deals are being investigated by the ATO.
More worryingly, some of the shadiest deals are being financed by fraudulent applications using fake income tax statements and employer references from foreign companies that were later discovered to be fictional.
To avoid getting involved in potential debacles, sellers should consider these valuable tips when dealing with foreign buyers:
- Complete due diligence about the buyer: Sellers should tell their solicitors to complete due diligence about the buyer. Among other things, it needs to be ascertained if the buyer is an Australian citizen, and whether he or she has the right to buy new or existing property under Australian law.
- Seek professional assistance: Sellers should find lawyers and financial advisers with extensive experience in international property deals. This can be tricky as deals might straddle time zones, legal systems, and overseas banks.
“Make sure your solicitor checks that any sale to an overseas buyer has been approved by FIRB and that the financing is in place from a known and reputable lender,” said Michael Clarke, principal of Clarke & Humel Property.
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