Foreign investors are being turned off Australian residential property investments due to the costs involved, according to the Real Estate Institute of Australia (REIA).
The institute has indicated that Australia is grappling with the lowest level of foreign investment that’s been seen in residential property for the last five years, with just 7,500 applications for foreign investment in residential property being received in 2018–19, pre-COVID-19.
It’s down from the 40,000 applications entered in 2015–16.
Fronting a Senate economics committee to give evidence on the Foreign Acquisitions and Takeovers Fees Imposition Amendment Bill 2020, REIA president Adrian Kelly said fees for foreign investors “should be structured to reflect the cost of undertaking the assessment and administration by the Australian government, instead of imposing unnecessary impediments on foreign investors in the residential property market”.
The REIA revealed that the proposed fee for residential investment contained within the bill is twice that for agricultural investments, and 50 times that of commercial land and business investments.
“Foreign investment in the residential property market is the lowest it has been since 2015–2016,” Mr Kelly said in his address.
“We understand from our agents working in this area the cumulative impact of Commonwealth and state government fees has contributed to decreased demand from foreign investors.”
The REIA has proposed to both the Treasury and the Senate economics committee “that fees should be equitable and simply reflect the cost of assessment and processing by FIRB”.
It cited evidence from a Productivity Commission 2020 research paper on foreign investment which revealed that the current fees were disproportionate to the cost of delivering the regulatory regime: while $144 million in fees were collected over 2017–18, operational costs were only $14.7 million.
Mr Kelly said residential property applications are offsetting and subsidising the cost of administration of other categories — which shouldn’t be the case.
He added that the fee-setting framework goes against recent commitments from all levels of government to deregulate and be more business and investment-friendly, especially given the COVID-19-driven downturn.
“In short, unnecessary impediments should be removed for foreign investors looking to invest in Australia’s residential property market,” Mr Kelly continued.
“We respect all national security considerations, but fees should ultimately reflect the cost of undertaking the assessment and administration.”