Don’t let fallacy get in the way of a good story

April 19, 2024 BY

It seems that investors have become an easy target, whether foreign or domestic, its great fodder for the alarmist media and anti-everything groups.

Like it or not, investors play a very important roll in housing supply, without them it would be a dire situation for renters, who are already on the rocks as supply dwindles due to domestic investors throwing in the towel as regulation and tax bite home, so foreign investors are needed to take up some slack.

Around 70% of residential investors in Australia have just one investment property, they are not the devil incarnate as some commentators imply, just mum and dad investors having a go.

HIA’s Chief Economist Tim Reardon said that in order to address the acute shortage of housing stock, governments need to attract more foreign investment, not increase taxes on them.

“There are two very common misunderstandings about the shortage of housing in Australia,” Mr Reardon said.

“One is that there is a large volume of vacant homes, and the second is that foreign investors are the cause of the housing shortage.

“Each Census the Australian Bureau of Statistics reports that around 10 per cent of homes were vacant on Census night.

“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.”

The ABS shows that around 10 per cent of homes are vacant in each census since 1986.

This figure is consistent with other developed economies and is not the cause of Australia’s housing shortage.

In February 2024, the Australian government introduced the Foreign Acquisitions and Takeovers Fees Imposition Amendment Bill 2024 that further increasing taxes on foreign investors if they leave properties vacant.

Mr Reardon said that it’s 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.

“This increase in tax on housing occurred without evidence of a problem.

“The Australian government has also not published data showing the value of revenue raised from this tax over recent years.

“They have not provided estimates of the value of additional revenue to be raised from this tax increase.

“Given that the Australian government prohibits foreigners buying established homes, and taxes them if they are left vacant, it is not clear why some state Governments would need to consider additional taxes, over and above the ‘belt and braces’ approach adopted by the Australian government.”

In regard to the belief that foreign investors are buying established homes in Australia on mass, the “Foreign Acquisitions and Takeovers Act 1975” prohibits foreigners from purchasing established homes in Australia without prior written consent from the Australian Treasurer.

Mr Reardon said that 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 foreigne 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.

“Since the introduction of punitive rates of stamp duty on foreign investors building homes in Australia, they have withdrawn from the Australian market, and we have seen the volume of apartments commencing construction falling 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.”

Mr Reardon said that 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.”