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.
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?