This article is more than 5 years old

This article is more than 5 years old

A parliamentary committee has recommended strengthening rules on foreign investment in Australia’s booming housing market, calling enforcement of the current framework “severely lacking” and “a systems failure”.

“We have found that the framework itself is appropriate and strikes the right balance in terms of encouraging beneficial foreign investment in the housing market, however its application is severely lacking,” the Liberal MP Kelly O’Dwyer, who chaired the committee, said in a statement.

“I regard the current internal processes at the Treasury and FIRB [Foreign Investment Review Board] as a systems failure.”

The committee’s review, tabled in parliament on Thursday, was commissioned amid concerns that local buyers were being squeezed out of the residential property market by foreign investors, particularly from China.

The review found there were serious gaps in the enforcement of foreign investment rules, including “virtually non-existent” sanctions, no prosecutions and inadequate data on purchases.

“Australians must have confidence that the rules, including those that apply to existing homes, are being enforced. Our inquiry revealed that, as it stands today, they could not have that confidence,” O’Dwyer said.

National party MPs and other rural interests have argued against selling farm and mineral land to foreigners, and there are signs of an influx in Chinese housing investors.

The investment bank Credit Suisse this year estimated that Chinese investors could pour $40bn into Australian residential property over the next seven years, pushing up housing prices even further.

The committee tabled 12 recommendations, including removing barriers for adequate auditing and new penalties for breaching the rules.

While foreign buyers are mostly limited to purchasing new housing, temporary residents can buy one existing property but they are supposed to sell it when they leave the country.

The report recommended migration laws be amended so that the immigration department informs the FIRB when temporary residents depart, and that a national register recording the citizenship and residency status of housing buyers be set up.