Control on foreign investment
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 purchasers seem to be as good a place to start as any. Or are they?
I believe before we apportion any blame, we need to clarify exactly who are ‘foreign buyers’. This should actually be rather easy as the nice chaps in the hallowed halls of government have a whole department dedicated to this particular topic – the Foreign Investment Review Board (FIRB).
They have rules and regulations that relate to how we as a nation permit noncitizens, nonresidents, temporary residents, holidaying types and businesses to purchase dwellings.
Firstly, do we really need to control at all, what is principally supposedly a free market? Personally I think we do, Australia has an enviable established housing market, despite our population and geography.
Our title registration, our legal processes, our defined property boundaries, our longterm capital growth history, along with the strong rental market, are all signs of a grownup real estate market.
Numerous other nations near and far simply do not have such systems in place, or have the economy or currency that displays the air of assurance/ 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 very much 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 from whatever nation, which can increase demand to a point where prices got 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?
As I’m writing this I’m realising I’m entering potentially dangerous political territory. As such, I will tread wisely.
We already have controls and guidelines such as the “buy new” rule, plus permission and approval required for new residents/visitors/holidaymakers to make a purchase.
In light of recent news stories of multiple purchases, homes lying vacant for years and others possibly being used as nothing more than vehicles for money laundering, it does seem that even if the controls are there, they are not being monitored fully. I have personal experience of this.
As new migrants here 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 and asking questions I discovered that a polite letter to FIRB could relax the rule.
I do not pretend to know the answers to this dilemma; we do need controls that are both fair and strictly adhered to.
I also believe we should not 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 are not allowed to conveniently bypass any legislation set down and that corporate requests are reviewed thoroughly.
It should all be about balance. Allow anyone to embrace our housing market, allow investment and acquisitions from any nationality anywhere in the world, 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 very established developer released a new highrise, high-profile apartment scheme.
At the point of release more than 50 per cent of the sales were to overseas buyers.
And of the 230 units released, 208 were sold in the first few hours.
ONGOING DILEMMA: Rules regarding foreign investment ownership of residential property are needed.