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A tripling of foreign investor fees, while a positive step, will not solve the housing crisis, members of the broking industry have warned.
The federal government’s alterations to the foreign investment framework, which will see international investors charged higher fees, has been tentatively welcomed by brokers specialising in overseas buyers, but more will need to be done to address affordability.
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On Sunday (10 December), the Albanese government revealed it would be altering the framework to help increase Australia’s housing stock and provide more homes for Australians by raising around half a billion dollars to be invested in the government’s housing policy.
The changes will 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.
In a joint statement, Treasurer Jim Chalmers MP and Minister for Housing Julie Collins MP commented that the move “strengthens Australia’s already robust foreign investment framework”.
“These changes further encourage foreign nationals to buy new property instead and help to ensure that those who do get approval follow the rules,” the statement read.
“The higher fees for established dwellings will encourage foreign buyers to invest in new housing developments. This creates additional housing stock, jobs in the construction industry, and supports economic growth.
“The increased vacancy fees will encourage foreign investors to make their unsold properties available to renters.”
As part of the changes, the government also revealed it would cut application fees for foreign investment in Build to Rent projects to support an increase in homes across the country.
“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 said.
“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.”
Impact will be ‘marginal at best’ – Alan Hemmings
Following the news, the chief executive of expat loan specialist Homeloanexperts.com.au, Alan Hemmings, told The Adviser he did not believe the changes would have a material impact on the housing affordability crisis.
Mr Hemmings commented: “Foreign investors are about 1 per cent of all property owners so the net effect of the changes will be marginal at best.
“It may drive some additional revenue for the government, but it doesn’t solve the root cause of the property market supply issues. We do not have enough or build enough houses.
“Yes, they have said foreign investors can reduce the burden of the tax by buying new homes, but we simply are not building enough.
“The one group it may impact is first home buyers, as to get the additional level of incentives they need to build, they will now be competing more with foreign investors.”
Similarly, Jonathan Preston – a senior mortgage broker at Homeloanexperts.com.au – stated: “I personally think it’s a step in the right direction. In addition, from a political standpoint, non-residents can’t really complain about higher taxes so I suspect that is a bit of what is happening.
“Do I think it will make much difference to housing affordability though? Personally, I don’t think so. I don’t think it is enough.
“I think that increasing the vacancy tax makes sense, but again, I don’t think this is a big part of what is constraining supply either.”
Mr Preston noted that he believed the government’s announcement regarding a clampdown on international students and workers exploiting loopholes in the visa system and an overhaul to its migration program may have a greater impact on the housing market.
He commented: “I think there is more talk than useful action in this announcement.
“I am of the belief that the new changes around making the immigration requirements stricter that were announced today will play a bigger part in resolving the current affordability crisis.
“Fewer immigrants means less rental demand, which means slower rent growth, which means a lower CPI and this should flow through to housing affordability in the form of more moderated cost-of-living expenses going forward and potentially moderated interest rates in the future. Services and other factors may also moderate.
“The immigration changes are probably designed to bring Australia more in line with the global disinflationary cycle we are currently seeing, but changing the foreign purchaser rules is still a step in the right direction.”
The government’s increased focus on immigration along with foreign investors followed both NAB’s chief economist Alan Oster and AMP’s chief economist Shane Oliver suggesting that an element of migration control could help the government deal with the growing housing affordability challenge.
[Related: A place to call home]
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