Uren: Throw FHBs to foreign wolves

Wednesday 26 November 2014

The Australian’s David Uren has produced a half-baked defence of foreign investment into pre-existing dwellings, arguing that concerns about foreign investment are a fallacy and that there is “little economic justification” for tightening enforcement of the foreign ownership rules. Let’s examine Uren’s arguments.

If I am selling a house, and a Chinese buyer wants to pay more than an Australian, I make a larger capital gain and can use the additional proceeds to buy the house of my dreams — possibly a new one — or add more to my superannuation, or spend it on consumption, but in each case, economic activity is increased.

If the property is bought by a foreign buyer as an investment it increases rental stock, which is often in short supply. More capital comes into the country, which we need given we run a persistent current account deficit.

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About the author

Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.