Property locusts are swarming Canberra to lobby against the modest changes affecting foreign buyers announced in the Federal Budget. From The Australian:
The property industry will throw new force into its campaign against budget changes that “demonise” foreign investors, as company chiefs arrive in Canberra today to warn of a hit to jobs and growth from populist reforms.
Angry at the way offshore investors are being targeted, the industry will warn cuts to residential and commercial property would wipe $5.5 billion from annual economic output if politicians continue to turn against foreigners…
Property Council chief Ken Morrison will… warn that the trend towards punishing foreign investors will ultimately impose a “tax” on Australia by making it less attractive for huge amounts of capital….
The Property Council gathering will include Susan Lloyd-Hurwitz of Mirvac, Mark Steinert of Stockland, Kylie Rampa of Lendlease, Peter Allen of Scentre Group, Stephen Conry of JLL Australia, David Harrison of Charter Hall and Carmel Hourigan of AMP’s real estate operations.
Industry modelling finds that a 20 per cent fall in foreign investment in commercial property would cut $3.2bn from gross domestic product, cutting billions over time from federal and state tax revenue. A similar cut to foreign investment in residential would cost $2.3bn. “The loss of GDP would be akin to losing three times Australia’s renewable energy industry,” the council says.
Now let’s go through each of the Budget measures affecting foreign buyers.
First, here’s the vacant property tax measure:
As shown above, this measure is expected to raise a modest $16.3 million over the forward estimates – certainly better than nothing. Importantly, it should help to increase the available supply of properties available to rent (at the margin), thus placing downward pressure on rents.
It’s a modest policy improvement, and there is really no justification for the property lobby to oppose this measure.
Next, here’s the Budget’s measure abolishing the capital gains tax exemption for foreign property owners:
As you can see, this measure is expected to have a major impact on Budget revenue, raising $581 million over the forward estimates. Again, this is excellent policy as it will raise much needed Budget revenue that can then be used to benefit the resident population.
Finally, there is the measure to restrict foreign ownership in new developments to 50%:
While this measure will have no direct revenue impact, it will better target large scale property development towards housing the resident population. This is the primary purpose of housing – to provide shelter – not to provide an avenue for speculative investment by foreigners.
This measure should also encourage apartment developments that are better suited to housing local residents, rather than the shoddy building of tiny shoeboxes aimed solely at foreign buyers for the purposes of making a quick profit.
Overall, the Budget’s measure aimed at foreign buyers are positive, albeit modest. They will provide much needed Budget revenue while helping to boost effective housing supply for locals at the margin.
Politicians should tell the property locusts to take a long walk off a short pier.
