In his second budget, Treasurer Joe Hockey has forecast for the government to reap $651 million over four years from foreign investors through tougher enforcement and penalties for foreign investment law breaches, especially related to real estate, as well as new application fees. The budget forecasts that $735 million in extra revenue will be raised by the measures, while only $83.6 million is being budgeted to be spent on extra FIRB compliance and enforcement activities. But will this deter foreign investors from Australia's property market?

Rob Elsom, Director of hockingstuart Carlton, Brunswick, North Melbourne and Northcote, doesn't think so. “It’s interesting to see that the Federal Government has gone forth on their word and are hitting foreign buyers with a fee of either $5,000 or $10,000. If anything, this small amount is hardly a deterrent for foreign buyers - the Victorian government’s three percent tax on foreigners who purchase residential property would have more of an impact," says Elsom.

"I just think the purpose of them buying here far outweighs the disincentive. If we look at the reasons the Asian buyer has come to Australia, there are a number: the quality of living is so good; the fact that they're sending their kids here for schooling; they think our economy is quite stable, which it is; we've got comparatively a strong economy compared to the rest of the world; we're on a similar time zone so it's very easy to communicate with family members and do business here because of that smilar time zone. There's a great amount of wealth coming out of China and other Asian countries and comparatively around the world, our real estate is still pretty cheap. They think it's as cheap as chips.

"The Federal government's measures, that's not a disincentive, that's more a cash-cow for the government. They're coming out saying we've got to look like we're doing something here for Australian citizens to try and stop that influence of the Asian market coming to Australia, but really, they're just making a bit of money. It's not going to disincentivise people coming and buying here. 

"The overseas investment thing has totally polarised people. You've got people selling their property who are totally thrilled there is the Asian investor coming in to buy their homes so they can move into a retirement village. Then you've got people competing with overseas investors who are trying to get into the property market.

Introducing a tax on foreign property buyers of around 15 percent, like Hong Kong and Singapore has done, would have an impact on the number of foreign investors here, says Elsom. "If the Australian government really wanted to stop it, they would have done exactly that. They're capitalizing on [foreign investment] happening as well. They're clearly not trying to stop it, they're just trying to show that they're stopping it without actually doing anything and getting some extra revenue on the side."

With the Budget showing that most other sectors of the Australian economy are stagnating, real estate is one area that's growing, which is why Elsom believes the government doesn't actually want foreign investment into the Australian property sector to stop. He believes foreign investment in housing will only increase over the next two to three years.  "They'll just start flooding into this country. Whether we like it or not, doesn't matter, it's going to happen."  

What do you think of the Budget measures for foreign investors? Comment below.