Quandary of foreign buyers
FOREIGN residential property ownership has hit the headlines yet again.
This is nothing new and usually heralds people looking to lay blame in a booming market.
We love to blame, surely it has to be someone’s fault and cashed up overseas buyers seem to be as good a place to start as any. Or are they?
Before we apportion blame, I think we need to clarify exactly who are “foreign buyers”.
This should be rather easy because we have the nice chaps at the Foreign Investment Review Board — we’ll call them FIRB for short. They have rules that relate to how we, as a nation, consider and permit non-citizens, nonresidents, temporary residents, holidaying types and businesses to purchase and own dwellings.
Firstly, do we really need to control at all, what is supposedly, a free market?
Personally, I think we do. Australia has an enviable established housing market, despite our population and geography.
Our title registration, legal processes, defined property boundaries and long-term capital growth history, along with the strong rental market, are all signs of a grown up real estate market.
Numerous other nations simply don’t have such systems in place or have the economy or currency which displays the air of assurance or low risk that has us viewed as a safe haven.
Or perhaps their own housing market is within the emerging category, where the private housing sector is still in its infancy.
Without any controls whatsoever, it really could cause the general housing market some serious issues.
Typically, an overseas buyer represents the more wealthy demographic, which can increase demand to a point where prices get squeezed up unsustainably.
However, we don’t need to ban the practice which leads to the most relevant topic — if we do need to control foreign investment, how can we do it and in what way?
As I’m writing this I realise I’m entering potentially dangerous territory.
This could be followed by a visit from yours truly to your suburb, possibly by helicopter, then wandering the streets, kissing your babies and hanging giant posters of myself at prominent street locations. To avoid this I will tread wisely.
We already have controls such as the “buy new” rule, plus permission and approval required for new residents, visitors or holiday-makers to make a purchase.
It does seem however, in light of recent news reports of multiple purchases, homes lying vacant for years and others possibly being used as nothing more than vehicles for money laundering, that even if the controls are there, they aren’t being monitored fully.
I have personal experience of this. As new migrants 10 years ago and then only classified as temporary residents, we were told that our visa would only permit purchasing brand new housing stock. Yet after a few months of research I discovered that a polite letter to FIRB would literally relax the rule.
We do need controls that are both fair and strictly adhered to.
I also believe we shouldn’t accept any abuse of the system and ensure that if an overseas buyer wants to enter our housing market for nothing more than financial gain, taxes should be implemented.
We should also ensure companies aren’t allowed to conveniently bypass any legislation set down and that corporate requests are reviewed thoroughly.
This should all be about a balance.
Allow anyone to embrace our housing market, allow investment and acquisitions from any nationality, but have strict, fair control, taxes where applicable, plus the ability to monitor the system for any breach or abuse.
Many other countries have the same conundrum.
An area of central London I personally know very well, after being an agent there for many years, is booming right now.
One developer released a new high-rise, high-profile apartment scheme.
At the point of release more than half the sales were to overseas buyers. Of the 230 units released, 208 were sold in the first few hours.
Prices for a modest 52sq m apartment started at $1.3m.