Foreign investment controls not the answer

Foreign investment controls not the answerPolicymakers and regulators need to think hard before taking action that could needlessly harm growth in the property sector and therefore the broader economy.This warning from the Property Council comes amid growing calls for new charges on foreign real estate investments, a media clamour about the perceived heat of Australia’s housing markets, and questions about gearing levels of commercial property companies.”The country seems to be whipping itself into a frenzy about foreign investment, but the facts don’t support the claims that many are making,” said Property Council chief executive Ken Morrison.”Less than 5 per cent of total residential real estate transactions are by foreign purchasers, and strong house price growth has been localised to just Sydney, where there is still an undersupply being worked through, and Melbourne.”Arbitrarily increasing lending measures runs the risk of shutting more first home owners out of the property market and slowing new dwelling construction.”Macro-prudential controls should only be introduced where there is systemic risk. “As the Reserve Bank of Australia acknowledged, domestic housing finance lending in Australia has been managed prudently by the banking sector to date.”With an economy in transition, the country needs a strong property sector to underwrite economic growth, and new taxes and unnecessary broad-based prudential measures put this at risk.”Property Council national president and CEO of DEXUS Property Group, Darren Steinberg, said, “Introducing new charges on foreign real estate investments would be counterproductive.”We need to remember the property and construction industries employ 1.3 million Australians, account for 1.5 per cent of GDP and contribute $34 billion in real estate-specific taxes. We don’t want to put this at risk.”There is no justification for new taxes or controls on this sector,” he said.