Excessive fees risk housing affordability

Excessive fees risk housing affordabilityThe Property Council of Australia has warned the Government that overtaxing lawful foreign investment in new housing could significantly worsen housing affordability for all Australians. In its submission on the Federal Government’s 2015 Options Paper – Strengthening Australia’s Foreign Investment Framework – the Property Council said the risk to housing affordability from excessive new fees was unacceptably high and will undermine the Government’s own policy of encouraging foreign investment into new housing construction. “If the Government proceeds with introducing new fees on foreign investment that are excessively high it risks making the already acute problem of housing affordability significantly worse,” Property Council Chief Executive Ken Morrison said. “Imposing an unjustifiably high new fee will deter foreign investors and drive away the capital developers rely on to get new housing projects off the ground. “Development companies in Australia rely on foreign investment for around 20-25 per cent of their multi-residential pre-sales. If you take this away you threaten the viability of new projects and the houses and the apartments they deliver onto the market for Australians to purchase. “This is turn means less new housing stock coming onto markets where demand already far outstrips supply, driving prices up. “Less new homes means greater competition and higher prices, making it harder for first home buyers and others, particularly in the $400,000 to $800,000 price range. The available data shows that this is the price range where the majority of foreign investment occurs, and would be most sensitive to a new impost of $5,000 and above. “The proposed new fees of $25,000 on commercial property investments are completely unjustified as the Government has acknowledged there are no compliance concerns. “There is no question that better data on foreign investment is urgently needed, or that the existing rules should be properly enforced. But this won’t cost anywhere near the $200 million the large new fees are set to raise, which risk deterring much-needed foreign investment in new housing construction.” “The revenue the Government estimates it will raise is way beyond what is required for the stated purpose, more than the budget of the ACCC ($180m) and half that of ASIO ($435m) and cannot be justified by the costs of administration, enforcement or compliance activities. “The Government must also be mindful of unintended consequences on greenfields development. “As with many large companies in Australia, some of our biggest development companies have significant offshore shareholdings which would trigger the proposed new fees every time one of these developers purchases land for a greenfields development, which will make new housing construction less affordable. “Additional housing construction costs will have to be borne somewhere along the line and the cost per home could be as high as $7. As 97 per cent of greenfield housing stock is purchased by Australians, many of whom are first homebuyers, there is a real risk they could end up wearing part or all of this additional impost.” The Property Council’s submission recommends extending the proposal to establish a register of foreign real estate investment to also close information gaps around housing investment and supply. The cost of the extended data would only be modest, which would be easily met by lower foreign investment fees. The former Housing Supply Council cost $2 million and provided valuable unique national data on actual and forecast housing supply, substantially less than the $200 million the Government estimated would be raised by the high fees proposed. Media contact: Fiona Benson | M 0407 294 620 | E [email protected]