Since 2006, the Foreign Investment Review Board (FIRB) has not prosecuted a single overseas buyer for purchasing a second-hand dwelling. The FIRB’s policy stipulates that overseas buyers can only buy new properties or newly completed dwellings.
Policing of what is happening at second-hand property auctions across Australia needs to start now. Auction clearance rates have been at record highs in Sydney and Melbourne for well over a year, which has been driven in part by foreigners purchasing second-hand dwellings.
Overseas investors purchasing second-hand properties are driving up house prices for local owner-occupiers. This market is not stimulating job creation or helping grow the economy. I have recently attended a few auctions and seen it for myself. Foreign passports are being registered at auctions without being checked for FIRB approval. Local buyers are being gazumped and priced out of the market.
In overseas offices in Beijing and Shanghai, investors are starting to reject new housing stock as the word is now out that Australia’s FIRB rules are not being policed. Their friends and family are purchasing second-hand homes with no barriers to entry and they, too, are now moving onto this bandwagon. The government needs to act now.
The purchase of new housing stock by foreign buyers is a significant driver for the economy. This investment has created thousands of jobs, increased housing supply and generated millions from stamp duty payments.
There have been discussions in government quarters about increasing stamp duty to 15 per cent for foreign buyers. If this happens, there are likely to be consequences in Sydney and Victoria, with many new projects coming to an abrupt halt. Much of the construction activity in these states has been driven by foreign investors.
The government has created the current issues that are being experienced in the second-hand property market with escalating prices. Demand is not slowing. Foreign investment will continue to grow.
The current FIRB housing policy must be reviewed and adequate resources allocated to stop the blatant disregard for it.
The focus needs to shift to what will stimulate the economy and produce long-term economic benefits for the country. Australia needs foreign investment to ensure our economy continues to move in the right direction. Stifling the investment in new homes by increasing taxes or creating more barriers to entry is not the answer.
The latest figures from the FIRB show that foreign investors have doubled their purchases of Australian property in just one year, with 5,755 homes worth $5.5 billion bought in the nine months to March.