Hewson: foreign property restrictions “jingoistic”

By Leith van Onselen

I have a lot of time for former Liberal leader, John Hewson. But his comments yesterday afternoon about the Abbott Government’s tightening of the foreign investment regime pertaining to residential property are ridiculous:

“It may help first-home buyers in the market for new apartments, where there has been a lot of foreign investor interest, it seems mostly to do with that, but I think there may be a jingoistic element to it, for the government to be seen to be doing something about foreign investment,” he said.

“But how far can a country like Australia, totally dependent on foreign investment, afford to go down that path?,” he asked.

One wonders whether Mr Hewson actually read the Government’s discussion paper or the parliamentary inquiry’s report into foreign investment in Australian residential real estate?

For if he had, he would have realised that the reforms are not about preventing foreign investment in newly constructed dwellings, but stopping illegal purchases of pre-existing homes. The former is a desirable form of foreign investment, since it adds to supply, whereas the latter is undesirable, since it does nothing but inflate home values to the detriment of first-time buyers.

In short, the reforms will establish a nation database of property interests – something that is sorely lacking – and increase surveilance of, and penalties to, foreigners that deliberately break the rules and purchase pre-existing homes without prior approvals, as well as third parties that assist them to do so.

Hewson needs to explain how adding transparency to the foreign investment regime and adequately enforcing the rules governing foreign investment into Australian property is undesirable?

Sure, the scheme will be funded by a modest fee levied on foreign buyers (i.e. $5,000 for homes valued under $1 million). But these are hardly excessive, particularly when compared against places like Singapore and Hong Kong, where large stamp duties are applied on foreign purchases (e.g. 18% in Singapore).

To quote Savills residential project head, Ged Rockliffe, in yesterday’s AFR:

“Its not a particularly big whack of the stick … there’s no question that these buyers have the buying power to weather it… And the people who want to buy property and migrate here aren’t doing it because of the value of the property.”

Furthermore, Australian stamp duties and other transaction costs will remain far more affordable than property markets in surrounding Asian countries, even if a levy is implemented. Restrictions on the number of properties buyers can own levelled in some Asian countries including Singapore have put Australia in an enduringly attractive position.

“Sure it’s a tax, but you can’t look at Australia in isolation to its neighbours”…

“Buying property here is still comparatively affordable”…

Exactly. Would Mr Hewson seriously prefer that the rules governing foreign investment into pre-existing housing continue unmonitored and unenforced, with zero data regarding who owns what? How is such a situation preferable?

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Comments

    • Sadly, I’m with you. I expect this to get killed. My only hope is that by the time it happens the unwind will already be an unstoppable force with its own weird momentum.

    • Given the current uproar about this in the media and populace, this has become an election issue, I think that it will gain more traction as time passes and the younger voting population can not afford a place to live.

  1. But as is pointed out (Ross Elliott) in the preceding article today, the foreign investment in “housing” – i.e. apartments, is completely divorced from any reality regarding what young Australians want to live in:

    http://www.macrobusiness.com.au/2015/02/high-density-housings-biggest-myth/

    So I disagree that there is any upside to this, even if Ross and Leith suggest there is. It is a bubble of classic massive malinvestment, which will become clear post-crash – empty, unsaleable, valueless chicken-coop apartment buildings. Some kind of free market repurposing will have to be the long term solution, but I can see the planning classes and the rentier classes in cahoots trying to force Australians to live this way in perpetuity. Hope there is a revolution.

    • Couldn’t agree more Phil.

      I also take issue with those who say “I don’t see a problem with it”.

      The problem is the mal-investment has removed the land for any other productive purpose. As these developments are typically in the CBD in Melbourne’s case, that is an absolute travesty because it means the pressure is brought to bear on other sites to absorb future development.

      As I’ve said before, once these towers go up they will stand for a 100 years or more as testament to failure of planning and the folly of our times.

    • They can not be modified.

      I used to hope this however have been informed that these types of buildings can not have the walls altered or modified as they are engineered for short term with all walls being part of the super structure.

      Older buildings used to be configurable with walls knocked through – these are definitely NOT.

      So wrong.

  2. What’s wrong with putting Australians first when it comes to property ownership in Australia?

    It’s interesting what topics that Conservatives supposedly start caring about effects of xenophobia and racism.

    When it comes to social harmony and disadvantaged minorities, all that concern quickly disappears for election oriented dog whistle racism.

    • +1 didn’t expect this from Hewson. I suspect he’s ignorant of the long-term LAW and just looking for some publicity. Disappointing.

  3. Hewson is 50% right. This policy is primarily for political purposes, and is thus jingoistic. But it also has the bonus of being good policy.

    • [email protected]

      Aphorism of good policy is good politics holds up this time

  4. Like so many others commentating on this topic Hewson, either deliberately or niavely misses the point.

    What the FIRB inquiry has exposed is the gross failure of a very important govt regulator to do its job and enforce our law.

    For all the noise and misdirected chest-beating of the govt in the last few days there it has not made one specific mention of the proven incompetence of FIRB chair and Labor appointee Brian Wilson.

    Hockey/Abbott must regain the control of the real issue, make a clear statement of intent and sack the incompetent Brian Wilson immediately.

      • Leith,
        You still haven’t explained how the ATO will prevent an unapproved foreign national from purchasing an existing Australian dwelling.

      • dude, work it out.

        They won’t prevent it immediately. But if a sale goes ahead without FIRB approval it could get picked up through the Tax Office’s data matching capabilities…and they would then impose fines etc.

        once a few get caught, it would prevent others from taking the risk.

        stop badgering. It’s annoying.

    • Amazing how they could so publicly “lose confidence ” in Triggs, but not say a thing re the failure at FIRB, is it not?

      • Transcript of Cabinet meeting 8am Mon 23 Feb 2015.

        TA: So guys this week we can risk a UN sanction and an AFP investigation and attack respected International Lawyer and Ex Dean of Uni of Syd Law school Gillian Triggs for trying to get kids out of jail……or we can sack the proven incompetent FIRB Chair Brian Wilson enforce the FIRB laws and give Husic and Bowen a flogging.

        Brandis: Let’s knife Triggs, I don’t like her.

        Scott M: Yeah she’s making me look bad

        TA: Ok Triggs it is

  5. Ross Greenwood speaks to the Deputy Chair of the House Of Reps Committee Ed Husic about changes to foreign property rules

    http://www.2gb.com/audioplayer/92031

    Hey Ed… I reckon there are some votes in this if you support this policy, not poo poo the idea

    Next would be negative gearing on new build onlly with tax concession against rental income, not your personal income..

    You’d be on the front bench before you know

    ———————————

    Self interest at it best..

    http://news.domain.com.au/domain/real-estate-news/foreign-buyers-set-to-be-hit-with-steep-fees-to-buy-australian-property-20150225-13ob2a.html

    Others on Thursday joined the chorus against the proposed steep fees for foreign buyers of Australian property, such as the Domain senior economist, Dr Andrew Wilson, who said it would force up rents as foreign students rented instead of buying – “there is no fee for renting” – and the McGrath chief executive, John McGrath, who said the government’s “stance on this matter is very dangerous and short-sighted”.

    • “Dr Andrew Wilson, who said it would force up rents as foreign students rented instead of buying – “there is no fee for renting””

      I do wonder how even Doc Andy could say that with a straight face.

      • “I do wonder how even Doc Andy could say that with a straight face.”
        That’s why he’s the “doctor”

      • If the good doctor does not shut up soon, there is going to be a line from a movie put into play

        “But if you don’t, I will look for you, I will find you, and I will kill you.”

    • It is a measure of the incompetence of Hockey/Abbott to execute to most basic play that Husic is speaking publically and relatively unchallenged on this topic.

      This was a gift for the govt to belt Husic, Bowen and other Labor luminaries who had oversight of this FIRB debacle. Instead we have Husic lecturing us about how the govt’s measures are racist, xenophobic and anti-business because the govt has decided to grandstand with a side show about “beefing-up” fees and penalties .

      All Hockey had to do was enforce the existing law. One little administrative requirement.

      There is still time to get it right Joe.

      • Had a listen to that interview with Ed.

        He sounds like the Member for Property Developers and Foreign Nationals.

        Crikey Ed we know you don’t want to support anything the government does, and mostly for good reason, but why hitch your flag to such a dog of a position.

        It is not that hard.

        1. Foreign buyers (including temp residents) ONLY buy new property

        2. Register status of the owner on title so foreign buyers cannot buy existing properties.

        3. A levy on Foreign buyers of new property to pay for enforcement.

        That encourages supply while removing one source of speculative interest in the market for existing houses.

        What the public need you to do is make the LNP actually deliver not fluff around getting in the way and giving comfort to the spruikers who don’t a rats who owns or buys shelter in Australia.

        While the smarter pennies in the LNP are desperately trying to drag their loon pond back to the centre Ed wants to outflank them on the right.

        Doh.

      • Joe doesn’t want to reduce the rate of foreign investment in property or enforce anything. He just wants to clip the ticket. He’s come within a millimetre of saying it straight out.

      • My read is Husic (as the groomed shadow finance/Treasury underling) is under orders to protect Bowen from any fire. Bowen is extremely vulnerable on this and is dripping in the muck of proven 2008-2013 FIRB incompetence.

        KO’D and Hockey’s inability to execute this play is astounding. They have played it so badly, a simple lay down misere is turning into an own goal.

    • Most of the public comment has been that the fees aren’t high enough.

      Perhaps there’s still hope.

    • [email protected]

      goodo I reckon

  6. Hells bloody bells!!!!!!!

    “But how far can a country like Australia, totally dependent on foreign investment, afford to go down that path?,” he asked.

    “TOTALLY DEPENDENT ON FOREIGN INVESTMENT”

    Am I the only one in this nation who suffers from shivers down the spine on reading that statement.
    Fair dinkum somehow this whole nation has lost the connection between its mouth and its brain!
    Doesn’t Hewson realise what he just said?

    We’ve arrived at a point where we are so screwed as a nation that all we can do is sell even more of it to whomever we can flog it. This is our economic policy.?

      • Yep stat he is right in a way. Trying to change direction IS going to involve a great deal of dislocation and there is no easy answer that’s for sure. I wonder if he considers the his role and the role of hios thinking and associates in creating the problem in the first place.

        I think not!

    • It’s been like that for a while, we are totally dependent on foreign anything, hence why we are running a population ponzi.

      We have transformed from a country directing it’s own path to one having it’s path directed for it by corporate and foreign interests.

      We denigrate local of anything to celebrate the foreign. We have sold our soul.

    • The stupidity and apparent hopelessness of all this leaves me drained of energy Flawse.

      It is difficult to maintain the rage against such overwhelming idiocy. Once you’ve recognised the truth, you can’t forget it.

      Most of the people I’ve encountered are largely ignorant of the big picture, and ironically they’ve been better off for it.

      • Slambo
        “Most of the people I’ve encountered are largely ignorant of the big picture, and ironically they’ve been better off for it.”

        Oh so vedry true. They just keep on making money out of real estate and investing in banks while we are trying to ‘do the right thing’ for future generations!

        Most say to me “Flawse’ (not really! :) ) we don’t understand what you are talking about and we really don’t care. You ought to relax more!!!!”

      • I hear ya Flawse. I’m considered the pessimist of the family for trying to speak truth.

        Good thing there’s a few kindred spirits like yourself here at MB to give me a spark of hope.

    • “Am I the only one in this nation who suffers from shivers down the spine on reading that statement.”

      Definitely not here on MB.

      I’d like to see it rephrased as “totally dependent on selling off our country to the highest foreign bidder”.

  7. He is softening the ground for Malcom. He is all bank don’t forget, and the banks DO NOT WANT THIS.

    The corporate sector has once again flexed its muscles – the corrupted politicians of Australia – Mussolini would be so proud,

      • Interesting.

        People think Malcom will revive the LNP fortunes, I think it will tear them to shreds. This could be another reason why.

      • “People think Malcom will revive the LNP fortunes, I think it will tear them to shreds.”

        I think he may revive their electoral prospects (at least temporarily) but he’ll rip the party apart. It’s going to be fascinating to watch but terrible for the country.

        The Nats (who let’s be clear, have no say in the Liberal party leadership ballot) are apparently demanding written assurances from Turnbull on several issues.

  8. “But how far can a country like Australia, totally dependent on foreign investment”

    That should be repeated every day to all Australians.

    It doesn’t sound very good for our kids does it?

    Politicians are imbeciles. Just be honest with the public, we’ll take a small reduction in living standards, stop population growth, so our kids can enjoy a lifestyle we’ve taken for granted. FFS, this is ridiculous what we’re doing.

    • [email protected]

      Australia, totally dependent!!

      Bewdy
      A three word slogan

      we’re saved.

  9. I think John Hewson raises a good point that needs to be discussed.

    Australia, since Federation, has always been dependent on Foreign Investment to some extent. But now Australia is “Totally Dependent on Foreign Investment”.

    What people should be asking is, how did this happen?