Proposed foreign investment rules that introduce a steep new fee for investing in Australian real estate have been slammed by the Property Council of Australia’s Chief Executive Ken Morrison.
Mr Morrison warns that lumping real estate in with national security assets, like ports and telecommunications infrastructure, will make “Australia a less attractive destination for investment than it should be at a time when we need it most”, noting the government “should be using every lever within their reach” to encourage new investment.
“The Federal Government is in the midst of re-writing foreign investment rules to apply stricter national security tests for proposed investments,” Mr Morrison explained.
“On the face of it, this shouldn’t cause any issues for a vanilla asset class like real estate with few if any security issues at play.
“However, to fund this new security oversight, it is also proposing a new fee regime which will significantly increase the cost of investing here especially for mid-size to large investments.
“For the average commercial real estate transactions of $264 million, it would mean a 250 per cent increase in fees. For transactions of $1 billion, it would mean an extraordinary nine-fold increase.”
The hefty new fees group real estate investments with security assets which “presumably will require a more forensic security assessment” and therefore justify the additional fees.
Mr Morrison pointed out that Australia already screens 40 times more investment proposals than the US, and 90 times more than Germany.
“It’s hard to see how these proposals make sense at all at a time when the Government is actively looking to the private sector to power up our economic recovery.
“Commercial property investments are typically straightforward, non-controversial and involve well-known and established institutional investors.
“We should not be making Australia a less attractive destination for investment than it should be at a time when we need it most.”