Foreign investors buying established homes could soon see associated fees tripled, while those who leave homes vacant could face double the current penalty, Treasurer Jim Chalmers revealed yesterday.
The changes are intended to increase housing stock in Australia, thereby taking the heat out of the market and easing the strain on renters.
Dr Chalmers argues that, if foreign investors were discouraged from buying established houses, they would instead use their money to fund new housing developments.
Meanwhile, hiking the fees charged to foreign investors who leave a property vacant for more than half of a year is expected to increase supply on the rental market.
It will also raise around $500 million, Dr Chalmers noted, which could in part help to fund the Government’s housing policy.
Industry experts, however, warn the plan could backfire; they claim hiking fees could discourage foreign investors from investing to Australia.
“Foreign investors build new homes, they don’t live in them, then cannot take them out of the country and are central to addressing the shortage of housing in Australia,” Housing Industry Australia chief economist Tim Reardon said.
The housing shortage falls hardest on renters, according to Mr Reardon, but renters could be set to benefit from a reduction in fees facing foreign investors constructing built-to-rent projects.
As the name suggests, those funding built-to-rent developments do so with the intention to keep the project, renting apartments out to tenants rather than selling them.
Leasing in built-to-rent developments is said to be more secure than leasing on the private market, and the projects could put a decent dent in the current rental crisis.
Just 1.02% of rental properties across Australia were empty in October, PropTrack found.
Foreign investment application fees for Build to Rent projects will be charged at the lowest commercial level from later this week, no matter what type of land is involved.
Previously, investors constructing build-to-rent developments on certain land types – residential land, for instance – faced higher foreign investment application fees.
“Build-to-rent has the potential to create 150,000 homes over the next decade, but the settings must be right,” Property Council of Australia CEO Mike Zorbas said.
He noted that changing property investment rules “week in and week out” could hamper the nation from reaching its target of building 1.2 million new homes in the five years from July.
According to ABS figures for October, there were just 284 new 'non resident' home loans funded in the month, compared to more than 31,000 owner occupier loans and 16,800 investment loans.
Monthly numbers have been fairly steady for the past four-and-a-half years, when the statistical series began.
However trusts and international student property buying can obfuscate figures.
On top of fee hikes, the Albanese Government will strengthen the Australian Taxation Office’s (ATO) abilities to ensure foreign investors are following the rules.
One rule demands temporary visa holders who buy property to live in for the duration of their stay sell their home after they leave the country.
Propertyology head of research Simon Pressley dubbed the proposed changes “absolute donuts”.
“These policy changes will have no material impact on market conditions, including housing supply and asset values,” he told Savings.com.au.
“Many residential buildings in high density locations across Australia would struggle to ever get developed if not for the preparedness of foreign buyers to sign purchase contracts which help developers meet their pre-sale quota for construction to commence.
“This is yet another example of a politician standing on a podium and pretending to take the national housing mess seriously.
“Surely people are intelligent enough to see that the government’s primary motivation for these changes is raising more tax revenue. That’s it”
Image by Joseph Bobadilla on Unsplash.
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