The Australian’s David Uren has written a spirited defence of foreign property investment in residential housing, arguing that it is a non-issue and urging policy makers and politicians to ignore pleas for intervention:
Temporary residents may purchase a single established property while they are here but must sell on departure so, with relatively stable inflows and outflows of temporary residents, there is no net effect on the property market. However, foreign residents may purchase newly built property. There is no doubt that their interest is supporting the revival of new residential property construction, particularly of apartments. In NSW, the number of new apartments gaining council approval each month has more than doubled since the end of 2012 and is now at a record high.
Testifying before the House of Representatives economics committee last week, Reserve Bank governor Glenn Stevens noted that foreign investors in real estate were generally confined to newly built accommodation…
Both the government and the opposition should ignore the real estate tattle.
As argued yesterday, foreign purchases are only a minor cause of Australia’s unaffordable housing, and the lion’s share of the blame rests on distorted tax policies (e.g. negative gearing) and the myriad of constraints on housing supply implemented by state and local governments.
That said, foreign purchases of pre-existing dwellings has grown very strongly in recent years, as illustrated by the below table from FIRB, contradicting Uren’s claim that “there is no net effect on the property market”:
Leaving aside the merits of foreigners purchasing newly constructed dwellings, which at least adds to supply, the threshold question that Uren and other apologists for foreign property investment must answer is: whether the $12.7 billion spent (13,571 properties purchased) over the last 4 years on established residential property by foreign nationals is worth the offsetting burden placed on the younger generation of Australians?
Young Australians have a right to expect the government to implement measures to make housing more accessible by increasing supply, as well as clamping down on excess demand, whether from foreigners or local tax-advantaged speculators.
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