Letter to PM on Residential Property Prices and Foreign Investment Laws

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The news that the Rudd Gov­ern­ment was rolling back its changes to Aus­trali­a’s for­eign invest­ment rules on hous­ing came as we were still on The Walk. Just pri­or to start­ing it, I received a note from Dr John Daffy, with the fol­low­ing let­ter from him to the PM attached. I asked John whether I could pub­lish his let­ter on the blog, and he agreed.

Just as the absence of sta­tis­tics on for­eign pur­chasers means we’ll nev­er real­ly know the impact they had on the mar­ket, we’ll prob­a­bly nev­er know how many indi­vid­u­als like Dr Daffy sent sim­i­lar let­ters to their MPs and the PM; but judg­ing from the rapid back­flip on that pol­i­cy, there must have been plen­ty.

Pri­or to the change, 50% of “off the plan” apart­ment sales could go to non-res­i­dents; after it, 100% could; now we’re back to the 50% ratio. So the changes restore the sta­tus quo on that point.

But they don’t go far enough. The prop­er­ty lob­by for­ev­er asserts that the cause of high house prices is under­sup­ply; here’s a sim­ple pol­i­cy mea­sure then to increase the sup­ply of apart­ments for peo­ple who actu­al­ly live in Aus­tralia. Why should only 50% of new apart­ments be reserved for local buy­ers? Why not 90%?

Allow­ing up to 10% of new apart­ments to be pur­chased by non-res­i­dents should more than cater for war­rant­ed pur­chas­es by globe-trot­ting non-res­i­dents in our glob­alised econ­o­my. I sus­pect that allow­ing a fur­ther 40% to be pur­chased by non-res­i­dents caters more to the prop­er­ty lob­by than it does to the jet­set.

Dear Mr. Rudd

Re: Aus­tralian Res­i­den­tial Prop­er­ty Prices and For­eign Invest­ment Laws

I write to you to ask for an expla­na­tion as to why for­eign invest­ment laws have been changed in Aus­tralia allow­ing non res­i­dents to pur­chase res­i­den­tial prop­er­ty (oth­er­wise known as fam­i­ly homes)

This deci­sion has result­ed in approx­i­mate­ly 30% of fam­i­ly homes in inner Mel­bourne being sold to peo­ple who are not res­i­dents of this coun­try and has been a major fac­tor in increas­ing fam­i­ly home prices dra­mat­i­cal­ly, in what was already the most expen­sive real estate in Australia’s his­to­ry rel­a­tive to wages.

Suc­ces­sive gov­ern­ments have also inflat­ed prices with home owner’s grants and approx­i­mate­ly 5 bil­lion dol­lars of tax breaks per year for land­lords at the expense of poten­tial home own­ers (with neg­a­tive gear­ing) Suc­ces­sive gov­ern­ments (State and Fed­er­al) have also dra­mat­i­cal­ly increased immi­gra­tion and ensured out­er sub­ur­ban land is arti­fi­cial­ly more expen­sive than it should be due to a num­ber of poli­cies which lim­it sup­ply.

The Rudd Gov­ern­ment has played a major role in increas­ing these prices to the absurd lev­els we now have with the aver­age per­son com­plete­ly unable to buy the aver­age home in this coun­try. So much for work­ing fam­i­lies. It has man­aged to do this with the first home own­ers grant, a flood of for­eign investors and changes to the super­an­nu­a­tion laws.

The recent changes to the super­an­nu­a­tion lim­its were “spun” as “clos­ing a loop­hole” where­by the “rich” received a tax deduc­tion. The net result of this pol­i­cy is to dri­ve peo­ple in to neg­a­tive gear­ing in prop­er­ty and fur­ther inflate house prices away from the aver­age home own­er who pays the full inter­est on his loan( with no sub­sidy from the Aus­tralian Tax­pay­er). The Rudd gov­ern­ment is obvi­ous­ly con­vinced that the home prop­er­ty mar­ket needs to be inflat­ed even fur­ther and is very will­ing to sup­port the banks in this pur­suit.

To add fur­ther insult, peo­ple who are sav­ing for a deposit on their home have the inter­est on their deposit taxed at their mar­gin­al rate (keep­ing them fur­ther away from a ris­ing mar­ket.) They may as well be sub­si­diz­ing their own land­lord who is invari­ably get­ting a tax deduc­tion.

I have watched in dis­be­lief as gov­ern­ments have done EVERYTHING they pos­si­bly could to pump up house prices. For­eign­ers’ buy­ing our fam­i­ly homes and fur­ther inflat­ing prices is the final straw. Allow­ing peo­ple who don’t live in this coun­try and do not pay tax to dri­ve Aus­tralians out of Aus­tralian homes is a nation­al dis­grace.

I call on the Rudd gov­ern­ment to roll back imme­di­ate­ly the for­eign invest­ment laws which allow this nation­al dis­grace to occur.

Yours Sin­cere­ly Dr John Daffy

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