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After the federal government announced on Sunday (10 December) that it would be tripling the fees for foreign investors purchasing established homes and doubling vacancy fees on foreign-owned dwellings in a bid to free up housing stock, the property industry has said that more needs to be done.
Tim Reardon, chief economist at the Housing Industry Association (HIA), disagreed with the government’s decision to raise fees on foreign investors.
He said: “In order to address the acute shortage of housing stock, governments need to attract more foreign investment, not increase taxes on them.
“There are two very common misunderstandings about the shortages of housing in Australia. One is that there is a large volume of vacant homes, the second is that foreign investors are the cause of the housing shortage.
“It is a fallacy to think that 10 per cent of homes are unoccupied and unhelpful for policymakers to suggest that homes are being withheld from the market when a core problem is that governments continue to increase tax imposts on new homes.
“Secondly, 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 The consequence of this is that these investors have withdrawn from the Australian market and this is a key reason why the volume of apartments commencing construction is now almost half of what it was in 2016.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.”
While the Property Council of Australia welcomed the Build to Rent support for foreign investors, it also called for further measures to encourage additional foreign investment and help reach the government’s 1.2 million home building target by 2029.
Chief executive of the Property Council of Australia, Mike Zorbas, stated: “Build to Rent has the potential to create 150,000 homes over the next decade, but the settings must be right.
“To give people the full spectrum of affordable housing choice we need to tap into institutional investment and today’s announcement is an important step.
“Encouraging overseas investment to go into new assets makes good sense.
“In a highly competitive global market for capital, the national cabinet needs to think holistically about the tax settings that can help or hinder investment in creating more homes for Australians.”
Similarly, spokesperson for affordable housing campaign Everybody’s Home, Maiy Azize, commented: “This is a step in the right direction, but it won’t solve the housing crisis.
“Right now, domestic investors are the ones pushing up the cost of housing and profiting from tax handouts – and an empty home is an empty home regardless of who owns it.
“If the government is serious about making homes more affordable, it would end the tax handouts that are used by a significant number of investors.
“This means abolishing negative gearing and capital gains tax. The billions we raise can go into desperately needed social housing.
“Investors can’t keep pushing up the cost of housing for everyone else. The government must get serious about tax reform for all investors, not just those who live overseas.”
What do the foreign investor changes include?
According to the government, the foreign investment framework will be tweaked to include:
- A tripling of foreign investment fees for the purchase of established homes.
- A doubling of vacancy fees for all foreign-owned dwellings purchased since 9 May 2017.
- Enhancing the ATO’s compliance regime to ensure foreign investors comply with the rules, including selling their residence when required.
The government has said it intends to introduce legislation next year to implement the new fees.
Along with increasing fees on foreign investors purchasing existing homes, the government’s alterations also included cutting the application fees for foreign investment in Build to Rent projects, as a way to support the creation of more homes in Australia.
“Currently Build to Rent investors can be subject to different, higher fees if their projects involve particular kinds of land, like residential land,” the government stated.
“Lowering the fees for these investments will help to ensure our foreign investment framework is consistent and predictable for all Build to Rent investors and encourage the development of these projects right across the country that are specifically designed, built, and managed to provide long-term rental options for Australians.”
The application of commercial foreign investment fees to all future Build to Rent projects will apply after 14 December 2023.
The alterations to the foreign investment framework came amid increasing investor activity.
It also followed several economists calling for an increased focus on managing migration as part of the solution to the housing affordability problem.
Both NAB’s chief economist Alan Oster and AMP’s chief economist Shane Oliver suggested that an element of migration control was required for the government to be able to deal with the growing housing affordability challenge.
FIRB appointments
The Albanese government’s changes to the foreign investment framework also occurred after it appointed three new individuals to the Foreign Investment Review Board (FIRB) last week (7 December).
Linda Apelt, Kellie Benda, and Sarah Pearson were appointed to the board that examines and makes recommendations to the government regarding proposed investments subject to the foreign investment framework, each for a five-year term.
Ms Apelt joined having recently been the Agent-General for Queensland in the United Kingdom and the state’s trade and investment commissioner, Europe from 2017–21.
Ms Benda takes on the role with experience across mining and resources, energy, utilities, and more, having held several senior executive positions with AGL Limited, Origin Energy Limited, Emeco Holdings Limited, and Aurizon Limited.
Ms Pearson joined with experience in public and private science and innovation roles. She has served as chief scientist and chief innovation officer at the Department of Foreign Affairs and Trade.
[Related: Investor activity driving up housing lending growth]
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