The property lobby has been quick to oppose the Budget’s measures targeting foreign buyers.
Here’s the Housing Industry Association (HIA) via their Media Release:
HIA is concerned about the negative impacts on residential building from the Budget’s measures on foreign investment.
Plans to tax vacant homes, limit the share of foreign investment in new projects and increase foreign investor duties all send exactly the wrong signal to potential investors in Australia. Barriers to investment are not productive for the building industry or the economy more broadly; investment needs to be encouraged.
And here’s the Property Council of Australia (PCA) via its Media Release:
Our only disappointment with the Budget is that the Government has announced a range of measures aimed at punishing foreign investors. These seem designed to provide the government with a few good headlines but these measures will do nothing to improve housing affordability and potentially send a message about Australia’s openness to investment.
And here’s the PCA commenting in The AFR:
Property Council of Australia chief executive Ken Morrison said the vacant property chrarge was a waste of money.
“We have not seen any evidence that the ‘vacant property’ issue is real,” Mr Morrison said, “It appears to be a policy seeking to solve an ‘urban myth’.
Mr Morrison said that the tax “will cost more to administer than it will raise.”
“This measure will not improve housing affordability one iota.”
A further restriction by the government on foreign investment in Australia’s housing pool will be to revise the percentage of a new development that can be sold to foreigners.
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 PCA opposing 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 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.
