Many industry insiders are no doubt saying, “I told you so,” right about now, as reports surface to suggest that a crackdown on illegal foreign property purchases is opening the proverbial floodgates on housing supply levels across our major urban markets.
Even though a number of high profile analysts have been warning for quite some time that overseas investment activity was reaching worrying levels, and skewing inner city property values, the government seemed to turn the other cheek. That was until, an obviously well to do Chinese investor purchased a Point Piper home in Sydney, for a cool $39 million recently.
Apparently this was the red flag that prompted the government to look a little closer at what was going on with foreign property purchases. It didn’t take much scratching around to uncover $122 million of illegally acquired housing assets, purchased by foreign buyers.
Treasurer Scott Morrison says the government has issued $3.2 million worth of fines to date. But the real clanger is…all of this illicitly purchased property must be sold within three months of the owner being caught out.
Too little, too late?
President of the REIA Malcolm Gunning, and financial commentator Ross Greenwood, said the crackdown sent a clear message to overseas buyers, and would be welcomed by “most Australians”.
Given how much media there’s been about the affordability crisis, and the alignment drawn between housing values and overseas purchaser activity in Australia (and indeed many other countries throughout the world), it’s easy to see why this hard-line campaign could be celebrated as the government finally taking affirmative action.
But what of the bigger picture? Is this just another over-simplification of a much more profound elephant in the room? Okay, overseas investment is undeniably creating pockets of overly simmering housing sectors. But it’s also stimulated a construction boom, and could therefore be perceived as part of the solution to our accommodation supply dilemmas.
What we need is for the government and regulators to all get on the same page, with the same big picture view and objectives around housing supply and affordability; to give everything a good shake up, and really explore future planning policies and support other, innovative industries into this country.
Inviting new business to establish operations here could assist in infrastructure investment and jobs creation in parts of our wide brown land that are sitting there right now, doing very little as underutilised resource.
This whole foreign buyer crackdown campaign smacks of another ‘one term’ dig around for the proverbial ‘needle in the haystack’, at a time when we really need those who are meant to be leading, to step up and implement viable, common-sense, long term solutions.
So what might this latest knee jerk reaction mean for the property markets? Well, who can really say? I mean, all of this crackdown stuff is well and good…but how and who is policing it?
Gunning warns that we’re likely to see the construction boom start to lose a lot of the wind from its sails. And with the government looking to impose a $5000 per year fine on foreign investors who let their property sit vacant, there could also be a sudden injection of rental stock into inner city markets.
A while ago we reported on the ghost town epidemic sweeping the Melbourne and Sydney inner city apartment markets in particular, where entire buildings of brand new apartments were left lifeless and untenanted.
Recent reports suggest that almost 200,000 homes have been sitting empty in Sydney alone.
Of course all of these properties hitting the rental books at once isn’t the most desirable scenario here. Particularly if we’re also looking at a tsunami of new sales stock flooding key markets over the coming months. Only time will tell what the fallout will be.
But it’s also yet to be seen exactly how the government will effectively rein in the overseas buyer activity they’ve let run wild and free for so long now.
Things are certainly getting curious-er and curious-er for our property markets…