As housing affordability and availability remains (as ever) a hot topic, both Federal Labor and Liberal National Parties have now proposed a freeze on purchase of residential properties in Australia by non-residents. For 2 years, if you aren’t an Australian citizen or permanent resident then you’re not buying a home.
While its lovely to see both sides of parliament in agreement about something (anything, really), unfortunately this will in effect do absolutely nothing to help either supply or pricing (unless you were thinking of selling your $30M Vaucluse mansion to a foreign dignitary or chief executive).
The reason for this is that with very few exceptions, there is already a very tight framework around foreign ownership of homes in Australia anyway, with many of these rules brought in with a view to guard against wealthier or more populous nations being able to control a meaningful number of properties here, such that it might be detrimental to existing Australian residents.
To start with, a non-resident can only purchase a brand new property that has never been lived in, or buy land to build (with a strict timeframe to get the home done). So straight off the bat, you’re not competing for your Queenslander in Parramatta Park or your elevated home in Redlynch Rise as these buyers are restricted to new supply.
On top of that blanket restriction, purchases are also subject to Foreign Investment Review Board (FIRB) approval for whether a transaction can even go through. This application is subject to a fee that STARTS at $13,200 and goes up from there, with no guarantee of success. A buyer could be told no, or alternatively be told yes but not proceed with the contract for any other reason (such as finance).
Once a foreign buyer DOES have approval, they are then subject to an Additional Foreign Acquirer Duty, which comes out to 7% of the property value, ON TOP OF any other relevant stamp duty costs.
So not only is there already a restriction on what, but a financial restriction too. Using a $600,000 home as an example, a foreign buyer will pay an additional $55,200 in fees and duties MORE than a permanent resident or citizen would.
Against those already heady limitations, in a city like Cairns with no new unit development to speak of and relatively little new housing, well….the talk doesn’t walk.
A policy like this also encourages people to forget that there are times where foreign investment has driven local markets – goodness knows Cairns would have looked very different without the massive influx of capital from Japanese developer Daikyo back in the 80s and 90s, from hotels to golf courses to our very own Forest Gardens.