Foreign investors are not to blame for Australia’s housing shortage and are actually one of the keys to solving the crisis, according to an economist.
HIA Chief Economist Tim Reardon said instead of imposing more taxes on foreign investors, governments needed to attract more of them to the market.
“In order to address the acute shortage of housing stock, governments need to attract more investment in home building including from overseas investors, they need to stop increasing the cost of building new homes by imposing additional regulatory imposts and they need to assist local councils to invest in infrastructure,” he said.
Mr Reardon said there were two common misunderstandings about the shortage of housing in Australia, including that there was a large volume of vacant homes and that foreign investors were the cause of the housing shortage.
He said each Census night, the ABS reported that about 10 per cent of homes were vacant, but he said there was a big difference between vacant and unoccupied.
“Around half of these ‘vacant homes’ are people away from their primary residence on census night as they are on holidays, some are for sale, some being renovated or are in regional areas away from employment opportunities,” Mr Reardon said.
“It is a fallacy to think that 10 per cent of homes are unoccupied and unhelpful for policy makers to suggest that homes are being withheld from the market when a core problem is that governments continue to increase tax imposts on hew homes.”
Earlier this year the Australian Government introduced the Foreign Acquisitions and Takeovers Fees Imposition Amendment Bill 2024, which would increase taxes on foreign investors if they left their properties empty.
But Mr Reardon said there was no evidence this was the problem.
He said foreigners were already prohibited from buying established homes in Australia, without prior written consent from the Australian Treasurer.
“In the most recent year that the Australian government has published data, 2021/22, there were just 1339 homes (established dwellings) approved by the Australian Treasurer to be purchased by a foreigner,” Mr Reardon said.
“This is in a market of 583,039 transactions or just 0.23 per cent of homes.
“Foreigners are not responsible for the shortage in Australia.
“They, in fact, play a really important role in increasing the supply of homes in Australia.”
Mr Reardon said since the introduction of punitive rates of stamp duty on foreign investors building homes in Australia, they had withdrawn from the Australian market, and the volume of apartments starting construction had fallen by as much as 50 per cent in each capital city.
“One of the underlying causes of the shortage of homes in Australia are taxes on foreign investors,” he said.
“Since 2015, a range of punitive taxes have been imposed on foreign investors by State and Federal Governments.
“The consequence of this is that these investors have withdrawn from the Australian market, and this is a key reason why the volume of apartments commencing construction is now almost half of what it was in 2016.”
Mr Reardon said foreign investors built new homes, but didn’t live in them.
But nor could they take them out of the country.
“They are the key to addressing the inequity that falls hardest on Australian renters,” he said.
“One in 10 Australian detached homes are built by a company with significant foreign ownership.
“These companies are finding it increasingly difficult to invest in Australia and build new detached homes, due to the punitive taxes the government impose.
“Changes announced in last year’s Federal Budget will assist domestic institutional investors to build new homes in Australia, but they have not yet filled the space left vacant by the exit of foreign investors from the Australian market exacerbating the rental shortage across the economy.”
