In a ploy to help Gen Y and younger Australians get a foothold on the property market, the Federal Government is proposing foreign investors to be banned from buying more than half the properties such as apartments in any new development.
This is just one of the housing affordability measures which is set to be announced in the May Budget to help relieve pressure on first home buyers and owner occupiers who continue to face the ever-growing property prices, particularly in Sydney where the median dwelling price at the end of February 2017 sat at $795,000, according to CoreLogic.
50 per cent of new dwellings restriction has happened before
It’s not the first time that foreign buyers have faced a limitation on the dwellings they could buy. Before 2009, there was a regulation in place that meant developers could only sell half of their new dwellings in any development to foreign buyers. This was in a bid to ensure local buyers had a fair go at purchasing housing stock too.
However, this all changed when the Global Financial Crisis (GFC) hit. Chris Bowen, the assistant-treasurer at the time decided to abolish the foreign limit for off the plan properties which meant foreign buyers could buy whole developments as long as developers marketed the development both locally and overseas.
Property prices continue to creep up
Property prices are still creeping up though, with property prices in capital cities rising by as much as 10 and 15 per cent in 2016. Housing affordability is on everyone’s minds and the Turnbull Government needs to do something about this to ensure this situation does not get out of control.
Number of first home buyers fall
Figures for January 2017 shows that the market share for first home buyers has fallen from 13.8 per cent to 13.4 per cent, whilst investor lending continues to rise. Saving up a property deposit is becoming even more of a struggle, especially as wages growth is not growing at the same pace as property price growth.
Foreign buyers face numerous restrictions and fees already
Foreign buyers are already facing a number of restrictions and fees when it comes to investing in property in Australia. Foreign buyers can only purchase brand new property such as off the plan apartments, whilst they are also facing tighter borrowing rules as well as additional stamp duty charges, particularly in Victoria. Foreign investors in Victoria are now slugged with a 7 per cent stamp duty surcharge, up from 3 per cent, whilst the land tax surcharge for absentee owners has hiked up from 0.5 per cent to 1.5 per cent. For NSW, foreign buyers face a 4 per cent stamp duty surcharge, whilst Queensland has introduced a stamp duty surcharge of 3 per cent.
However, adding this foreign buyer restriction could be the last straw and could result in driving away foreign buyers investing in Australian property. Excessive surcharges and further restrictions on foreign buyers could lead to fewer international students coming to Australia as well as a slower population growth and a rise in unemployment.
The Property Council of Australia suggests restricting foreign buyers to only being able to purchase 50 per cent of new developments would not solve the housing affordability crisis. Chief Executive Ken Morrison stated, “There are very few projects where a majority of apartments would be sold to foreigners. Foreign investment helps projects start faster and underpins construction, which is what our cities need.”
He continues, “If we do things that close off housing construction, that risks the economy, housing supply and will make housing affordability worse.”
According to Mark Mendel, CEO of iBuyNew, “this is just a ploy from the Government to make it look like they are doing something for the Australian people and in reality, is a waste of tax payer's money putting this motion into play. The reality is that the majority of buildings developed by onshore Developers rely on local funding which typically limits their sales to foreign investors at 15%-20% of the total sales.”
Mendel also says that “it will discourage offshore developers to enter or come back to Australia as they typically have a large client base offshore that would purchase in their projects.”
We will have to wait until the May Budget to see whether this proposed foreign buyer limitation to just 50 per cent of dwellings per development comes into effect or not.
To find out more about buying property in Australia as a foreign buyer or to view what properties we currently have for sale, it’s best to get in touch with iBuyNew and speak to one of our expert Property Consultants to learn more.
Call us now on 1300 123 463
Published on 17th of March 2017 by Marty Stanowich