AN ARTICLE appearing today in The Australian canvasses the prospect of increasing stamp duty on residential stock purchased by “foreign investors” by 5%; with house prices again nearing record highs and millions of young Australians locked out of a prohibitive market, the measure falls far short.
This contentious issue is one of a number of “agenda items” that — as a conservative — I would dearly like to see addressed by the Abbott government, but we’ll see.
In any case, calls by former Macquarie Group banker Bill Moss to add an additional five percentage points to the rate of stamp duty levied on purchases of residential property “by foreign investors” is welcome as a starting point, but is inadequate as a complete solution.
Readers can access the article in question here.
Just to be clear, this column has no problem with foreign investment per se; investment in our companies, infrastructure, and commercial and industrial sectors generally is welcome, and of enormous benefit to Australia’s economy.
I do have concerns about foreign investment — especially from China — in the agricultural sector; we’ve discussed this before, in reference to the “northern foodbowl” project that was developed by Trade minister Andrew Robb in opposition.
We can’t compete against their labour, but they can’t grow enough food; it seems perverse to sell control of one of Australia’s great strengths (and sources of income) to the exclusive benefit of the Chinese (and, of course, whoever pockets the windfall from the sale of the assets).
But I draw the line on houses, apartments and the like.
Chinese investment in Australian residential property “could increase tenfold,” according to Moss — who then goes on to cite the example of Vancouver in Canada, where Chinese investment in residential stock has been at least partially responsible for pushing average house prices over $1 million.
I have to be emphatic about this: housing in Australia must be the preserve of the people who live in Australia, and not form part of an investment asset pool increasingly acquired and controlled by offshore interests.
In case anyone thinks this position is motivated by xenophobic or racist sentiments, I should add that I have no problem with foreign nationals who are permanent residents in Australia owning houses here, or even acquiring investments whilst they live here.
But far from simply adding a “hassle tax” to the purchase price (and with the oceans of cash available to the increasingly wealthy middle classes of Asia, a rise in the stamp duty rate of 5% represents a drop in the bucket), I think non-resident foreign nationals should be barred from owning residential property in Australia at all.
It wouldn’t stop, for example, a Chinese property development company from acquiring land zoned for the construction of apartments, building them, and selling them: in terms of such commercial opportunities, what I am suggesting would make no difference.
But it simply isn’t appropriate for domestic housing stock to then be accrued and stockpiled by people in other countries, or — even worse — to funnel rental income streams out of Australia, whilst ordinary citizens of this country can’t afford to buy a house.
Some of the controls around foreign ownership of Australian residential property were abolished by the government of Kevin Rudd in 2008; soon enough, stories of vacant houses left empty began to emerge from suburban real estate agents, who speculated (no pun intended) about strategies to drive up the value of the investments by restricting the availability of supply in the areas in which the properties had been purchased.
I reiterate that I have no problem with Chinese people (or people from anywhere else, for that matter) buying a house whilst they live in Australia.
But once they leave the country, they should be forced by law to divest the asset within a reasonable timeframe — say 90 days.
There are, to my mind, two issues at play here.
The first is the obvious one about the affordability of housing, and it affects the rental market as well; by allowing foreign investment in residential stock, it restricts the supply for Australian citizens and residents, driving prices up and preventing rising numbers of Australians from becoming home-owners.
Consequently, more people are competing for that portion of the residential supply available to rent, driving rents through the roof, too — and perpetuating the cycle of housing unaffordability, because the higher the rent, the less disposable monies can be saved, and the harder it becomes for putative first home buyers to enter the market.
But the second issue speaks to those sections of the community who seek to avoid offending overseas interests at any cost: our national interest and our conduct as an international citizen are both extremely important considerations, but they are not the same thing.
The prospect of median house prices in this country hitting $1 million is unpalatable, and clearly far from ideal. But it is by no means unrealistic, given the overall skyward movement of property prices in Australia over the past ten years or so.
Should overseas investors be allowed to buy houses here if they don’t live here? Should they be able to stockpile residential properties and either leave them vacant to increase their value, or rent them out to take Australian monies out of the country?
Or are our apartments and houses the preserve of those who live there, with nary enough to go around as it is without external forces putting them further out of reach?
I’ll be interested to see what readers have to say.