The changes to the rules governing foreign investment in residential property announced by the assistant treasurer in April of this year have done nothing to benefit the Australian economy or struggling first home buyers desperate to enter the market.
One of the more significant changes is that all temporary residents seeking to purchase existing property in Australia will now be brought within the Foreign Investment Review Board notification, screening and approval process. This was a provision the government lifted in 2008.Temporary residents can still purchase established property for their own use whilst living in Australia however they must compulsorily sell when they depart.
On the other hand foreign non-residents can only invest in Australian real estate if that investment adds to the housing stock. Foreign Buyers are prohibited from buying established dwellings.
The major failing of the recent changes is that temporary residents should not be permitted to purchase established property. Temporary residents buying established property will only result in negative outcomes both for local property buyers and the Australian economy.
If local property buyers have to compete with temporary residents to purchase established property the result will be an increase in property prices and therefore inflation. This will make it even more difficult for first home buyers to enter the market. Temporary residents buying established property results in zero net increase in new dwellings, it does nothing to alleviate the housing shortage.
As with foreign investors, temporary residents should only be permitted to purchase dwellings brand new or off the plan. Buying these types of properties fuels the construction industry which is the cornerstone of our economy. There are hundreds of suppliers and tradesmen that contribute to the construction of just 1 dwelling. The positive flow on effects throughout our economy is phenomenal.
The policy I have outlined above will assist in keeping property prices down therefore making it easier for first home buyers, help stimulate the Australian economy and result in an increase in housing stocks. It is only logical that if you are going to allow property purchases by non-residents it should result in maximum benefits to the local economy and not disadvantage local buyers, unfortunately the way the rules stand at the moment this is not the case.