“In order to address the acute shortage of housing stock, governments need to attract more foreign investment, not increase taxes on them.”
That was the response from HIA’s chief economist Tim Reardon after Federal Treasurer Jim Chalmers announced changes to the government’s foreign investment framework this month.
Mr Chalmers promised the Albanese government would charge higher fees for the purchase of established homes, increased penalties for those that leave properties vacant, and strengthened compliance activity measures designed to ensure foreign investment in residential property is “in our national interest”.
At the same time, he announced plans to cut application fees for foreign investment in Build to Rent projects to support the delivery of more homes across Australia.
“There are two very common misunderstandings about the shortages of housing in Australia,” rebutted Mr Reardon.
“One is that there is a large volume of vacant homes, the second is that foreign investors are the cause of the housing shortage.”
Mr Reardon says while the ABS reports 10% of homes are vacant on census night, most are people away on holidays, homes for sale, or being renovated or residents away for employment reasons.
“This figure is consistent with other developed economies and is not the cause of Australia’s housing shortage,” he says.
“It is a fallacy to think that 10 per cent of homes are unoccupied and unhelpful for policy makers to suggest that homes are being withheld from the market when a core problem is that governments continue to increase tax imposts on hew homes.
“Since 2015 a range of punitive taxes have been imposed on foreign investors by State and Federal Governments. The consequence of this is that these investors have withdrawn from the Australian market, and this is a key reason why the volume of apartments commencing construction is now almost half of what it was in 2016.
“If governments tax something, there will be less of that item.”
Increasing taxes on foreign investors ultimately affects every Australian, Mr Reardon says.
“Foreign investors build new homes, they don’t live in them, then cannot take them out of the country and are central to addressing the shortage of housing in Australia,” he said.
“They are the key to addressing the inequity that falls hardest on Australian renters.
“One in ten Australian detached homes are built by a foreign owned company. These companies are finding it increasingly difficult to invest in Australia and build new detached homes, due to the punitive tax’s governments impose.”
In order to address housing stock shortfalls, Mr Reardon believes the government needs to attract more foreign investment by reducing the tax impost.
“They need to stop increasing the cost of building new homes by imposing additional regulatory and tax imposts and they need to assist local councils to invest in infrastructure,” he added.
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