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Controls on foreign buyers wanting Aussie homes will be extended on April 1. But experts believe it will do little to fix the housing crisis.
The federal government’s two-year ban on foreign buyers purchasing existing homes is nothing more than a political stunt, industry leaders have warned.
In Melbourne in particular, the strength of the auction market that is dominated by local buyers, has market experts convinced very little difference will be seen.
Set to take effect on April 1, the policy has the backing of both the Labor Party and the Coalition — with both sides of politics claiming it will improve affordability.
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But market experts have slammed it, saying foreign buyers are not the problem and that instead governments need to address soaring taxes and the flight of local investors away from Victoria’s property market — which are doing far more damage to the state’s housing market than internationals.
M R Advocacy director Madeleine Roberts said the ban was “nothing more than political theatre”, arguing less than 1 per cent of Melbourne’s market is made up of foreign buyers, while investors were leaving Victoria in droves due to high taxes.
“This is a headline-grabbing distraction while the real issues — Victoria’s sky-high property taxes and lack of investor incentives — are ignored,” Ms Roberts said.
M R Advocacy director Madeline Roberts has slammed the foreign buyer ban as ‘political theatre,’ arguing high property taxes are the real issue pushing up prices.
Colliers Victorian residential managing director Tim Storey agreed the ban wouldn’t change affordability, with foreign buyers simply shifting to new developments instead.
“Foreign buyers who would have purchased established homes will now focus on brand-new apartments,” Mr Storey said.
Colliers data shows foreign buyers accounted for just 0.24 per cent of Melbourne’s property sales over the past three years, with Victoria taking 45 per cent of all foreign purchases nationwide.
The ban will stop “foreign persons, including temporary residents and foreign-owned companies” from applying to purchase established homes, unless that purchase will lead to a significant increase in the number of homes available to Australians — typically through redevelopment of the site.
Permanent residents, New Zealand citizens and their spouses will be exempt.
The Foreign Investment Review Board already bars the purchase of established homes across Australia by international investors, though the ban would extend to cover some foreign purchasers such as international students.
Future foreign investment into Aussie properties will need to substantially boost the supply of new homes available to the market.
It also currently allows for the purchase of existing dwellings, if there will be an increase by at least one more dwelling as a result of that purchase. Otherwise they are only allowed to purchase recently built, or off-the-plan properties.
However, with FIRB approval required to finalise a sale the unconditional nature of an auction purchase has meant that internationals looking to buy in Melbourne, where as many as one in three homes goes to auction, has faced an additional hurdle — and could lead to the buyer losing their deposit if the government body rejected their purchase.
Meanwhile, international buyers in Victoria must pay an additional 8 per cent in tax on any residential purchase, with limited exemptions.
It means that for a purchase with $1m in dutiable value, a buyer considered foreign would pay $135,000 to the government to acquire the home.
International investors are allowed to purchase new homes and those sold off the plan — but in Victoria they can wind up paying double the tax bill on their purchase.
An Australian citizen or permanent resident would pay just $55,000 in stamp duty for the same purchase.
Ms Roberts added that in addition to the hurdles faced by international buyers, they were simply being outpaced by locals.
She said Melbourne’s 0.7 per cent price growth in February proved the recovery was being driven by first-home buyers — not foreign investors.
“People have been sitting on the sidelines for months, waiting for the right moment to buy, that moment is now,” she said.
While the foreign buyer ban made headlines, Ms Roberts said investors abandoning Victoria was the real crisis, with more rental shortages looming.
“Victoria’s tax policies have made investment a nightmare,” the buyers agent said.
“Many are heading to Queensland and Western Australia instead, and renters will be the ones to suffer.”
FIRB September quarter 2024 residential real estate approvals data shows which nations buy the most homes in Australia.
Rents have stabilised for now, but if investor confidence doesn’t return, supply will tighten and prices will surge again, she warned.
However, the Reserve Bank of Australia’s 0.25 per cent rate cut in February has already boosted buyer confidence, with PropTrack data showing Melbourne prices rose 0.67 per cent in that month.
Mr Storey added that another cut could flip the market back in favour of sellers, and likely lead to price rises — making international buyers largely irrelevant.
“If we see another cut, buyers will lose their advantage fast,” he said.
“Right now, buyers still hold power — but that won’t last.”
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david.bonaddio@news.com.au
