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