Proposed new FIRB fee will raise prices deter foreign investment

Proposed new FIRB fee will raise prices, deter foreign investmentThe Property Council of Australia has warned that the announcement from the Federal Government is 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. Chief Executive Ken 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,” Mr Morrison said. “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. The policy announced today, as it currently stands, 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. Date: 25/2/15 Issued by: Property Council of Australia “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. “Mr Hockey has said today that he expects the new fee to raise $200 million. Surely he is not suggesting that it will cost this much in data collection and administration. “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 the proposal it has put forward today. “We look forward to engaging closely with the Government, as we did throughout the House committee process, during this consultation period.” Media contact: Fiona Benson – 0407 294 620