Much ado has been made around Abbott and co’s apparent failure to address the so-called ‘housing affordability crisis’ in their recently released budget.
A number of lobby groups and industry commentators insist that the ‘Great Australian Dream’ of home ownership is fast becoming an unattainable fantasy for future generations.
But how the government might resolve the apparent predicament is anyone’s guess. Particularly when they’re so heavily reliant on the buoyancy of property to keep the budgetary wheels turning, albeit slower than they might like.
Should it extinguish the only bright spark in an otherwise gloomy economic outlook, placating affordability advocates with more restrictive policy around the only two only market fundamentals it overtly controls, being foreign buyers and property related tax legislation?
Tony recently assured property punters that favourable negative gearing and capital gains tax concessions for real estate investments are here to stay.
But the debate is far from over. Early last month, a Senate committee made over 40 recommendations around housing affordability, including calls to review negative gearing and the appointment of a federal minister for housing.
Not surprisingly, Coalition senators immediately rejected the findings, at a time when questions continue to mount over the inconsistent enforcement of foreign investment policy, which some commentators say has caused irreparable long-term damage to Australia’s housing sector.
Admittedly, it’s difficult to argue against the reality of a growing wealth divide between equity-laden homeowners and their offspring, who will likely struggle to get a foot up the property ladder in the future.
The question is, what’s been going on with foreign investment in our residential property markets and should we vilify overseas buyers for brutalizing the Great Aussie Dream?
Failing to police foreign investment
Although the Libs have made assurances that the ATO is forensically investigating all past property transactions that may have contravened foreign investment laws, some industry professionals are saying more needs to be done to put the brakes on future overseas investor activity immediately.
In a recent Property Observer article, director of Sydney’s Richardson Wrench Mosman and Neutral Bay, Robert Simeon, pointed to issues with the vast number of overseas purchasers pushing prices up, in the off the plan apartment sector specifically.
He observed that the underlying issue with affordability, particularly in the very tightly held inner Sydney market housing market, is a lack of sufficient high-density development to meet the burgeoning demand of a rapidly growing local population.
The state government is attempting to address this with a charter that would see local municipalities merge, in order to reduce the red tape currently restricting mid to high-density dwelling construction across the Harbour city.
Airing some dirty laundry
Getting in the way and pushing up land prices however, are Chinese developers who are legally allowed to on-sell Australian OTP products directly to foreign buyers, meaning a glut of accommodation never actually makes it to the local market.
“A vast number of these properties are land banked,” explains Simeon, “So they remain vacant which again is self defeating and ludicrous that this can happen in this day and age.”
Accusations have also been leveled at criminals from abroad, allegedly attempting to launder dirty money by investing in Australian bricks and mortar.
Simeon says this is a concern that Australian officials would do well to rein in sooner, rather than by the time it’s too late.
“Thailand has had serious problems with the Russian mafia who have bought up significant parts of that country where the government announced a few years ago that it was cracking down on these transactions,” warns Simeon.
“This is a global problem where Australia immediately needs to take decisive action which also means tightening the many legal loopholes.”
What’s the answer?
With record low, global interest rates making real estate the hottest commodity around right now – and the Sydney market sizzling – it’s unlikely that overseas investors will lose interest in our housing sector any time soon.
As such, if anything is to be done to ensure our future accommodation needs are met here at home, the government will need to consider how OTP apartments in particular are transacted offshore.
Simeon suggests a selling ratio of foreign buyers to Australian residents is a good starting point, along with the need for greater clarity around the long-term legalities of overseas property purchasers.
Of course the other side of the argument is that foreign investment in Australian housing has assisted in sheltering our broader economy from the recent resource sector slow down.
Perhaps it’s our perceptions that need to shift, as the world continues relying on real estate to keep the economic gears in motion and property becomes less about our basic human need for shelter, and more about a commodity of trade.
That’s the thing about these socio-economic debates…they’re generally far from one-dimensional and never one-sided.