Facts not fear needed on foreign investment

Facts not fear needed on foreign investmentThe federal government this week released an ‘options paper’ setting out new proposed fees for foreign investment in Australian real estate.The paper also sets out proposals for better data collection on foreign investment and increased penalties for breaches of the foreign investment rules.The Property Council supports better compliance and data collection, however it argues that the proposed fees of $00 and above are excessive, and well above what is needed to fund these activities and the $10 fee initially discussed with government.Chief Executive Ken Morrison called for a facts-based debate and warned that the government’s plan was likely to backfire and drive up house prices for all Australians.”The proposed introduction of excessive new fees on foreign investment in new residential housing would jeopardise housing supply, thereby exacerbating existing shortages and driving up house prices,” Morrison said.”The proposed new tax will act as a deterrent to foreign investment and send the wrong signal to potential investors.”This proposal from the Federal Government would introduce a new federal stamp duty by stealth.”It would be an extension of one of the worst, most inefficient state taxes and Australians are the ones who would ultimately pay the price.”Far from taking the pressure off house prices for Australians, it would drive prices up.”Under this proposal all home buyers, including first home buyers, will be worse off. “People looking to rent also face higher costs – you just can’t escape the logical, inevitable flow-on effects this new tax would have right across the system.”It is an outright myth that foreign investment makes houses more expensive for Australians, quite the opposite.”Foreign investment – be it from the UK or China – underpins new residential housing supply in Australia.”And without strong supply to meet the demand from our growing population, prices in already tight markets, like Sydney, are just going to rise.”It is critical that we sustain strong levels of building activity in the property sector if we are to have any hope of meeting increasing demand, ensuring affordability and reaping the economic, social and employment benefits this sector provides for the nation.”Sydney is already on track to be short 190,000 homes in the next ten years. As it currently stands the policy will see that figure climb.”The $25,000 the Government proposes to apply to foreign investment in commercial real estate is nothing more than a blatant revenue raising exercise.”As the Government’s own options paper notes, there have been no concerns around non-compliance in the commercial sector.”The Property Council absolutely supports strong enforcement of the existing FIRB regulatory system. “The last thing we want to see as an industry is non-compliance by a handful of foreign purchasers jeopardising continued strong foreign investment by the majority, or sparking a regulatory backlash.”We support bolstering the resources available to FIRB to ensure compliance.”We have advocated for better data collection and we would accept a modest fee to fund this, but not at the level the Government is proposing.”The Government has conceded that these new taxes are a cash grab with the $200 million they are forecast to raise far exceeding the revenue needed for the increased compliance and data collection we so strongly support.”ASIO’s annual budget is $435 million. The task of maintaining a foreign purchasers register and better compliance does not compare with the resourcing needed to keep Australia safe from terrorism. “The Government will lose many times this from existing revenue streams if building activity drops off sharply, as will likely happen under this policy.”The property and construction industries are the nation’s single largest taxpayer, contributing more than $34 billion annually.”We urge the Government to reconsider the obvious flaws in its proposal.”We look forward to engaging closely with the Government, as we did throughout the House committee process, during this consultation period,” he said.Submissions in response to the options paper close on 20 March 2015.FACTNew home building nationally reached its highest level on record in 2014, hitting 193,000 commencements on the back of foreign investment but Australia still faces housing shortages.FACTWithout new housing supply, house prices will continue to rise.FACTForeign investors are prohibited from buying established homes.FACTExisting homes can only be purchased by temporary residents and must be sold when they leave Australia.FACTForeign investors do not compete with first homebuyers: foreign investors can only buy newly developed property under existing FIRB rules and 80 percent of first homebuyers purchase established housing stock, according to ABS data.FACTEvery newly constructed home that a foreign investor purchases enables up to four other homes to be built.FACTIn the last financial year, temporary residents were only granted around 7,000 approvals to purchase, less than 1.5 per cent of the total number of properties transacted in that year – nowhere near enough to impact house prices.FACTAustralia already has some of the toughest rules for foreigners buying residential property in the world – second only to Switzerland.FACTThe Government admits there are no compliance concerns with foreign investment in commercial real estate, but has proposed a new $25,000 fee for these purchases.To read the options paper click here.