Peter Dutton has outflanked Labor, in one modest measure, with his housing policy proposal to ban foreign buyers. Michael West reports on Labor v Coalition proposals to address the housing crisis.
It’s getting nothing like the airplay of the Liberal’s “Upgrade Albo” to chip Anthony Albanese for his Qantas flight upgrades – and Peter Dutton’s housing policy may be underwhelming, even more so than Labor’s – but we must give the Liberals credit for one particular proposal they announced this week.
A two year ban on foreign residential property buyers. Labor ought to match it, at least.
As the median house price in Sydney just hit $1.65m, our weekly evidentiary reminder of how out-of-control is the housing market – skewed in favour of investors rather than Australians who face both rising rents and the prospect of never owning their own home – there was a little ray of light in the Coalition’s proposal.
“To alleviate pressure on the housing market, we will [among other things]: implement a two-year ban on foreign investors and temporary residents purchasing existing homes.”
Okay, so the ‘dig into your super’ bit of the Coalition policy is just kicking the can down the road. The ten-year freeze on the National Construction Code has been roundly criticised and the $5B infrastructure spend is just common sense, what Labor is doing anyway with its less underwhelming solution to housing.
The foreign buyers ban, although only pitched at two years, may be no silver bullet for what has become a severe housing crisis but it is an obvious measure which will help to stem demand, keep prices in check.
Foreign investors drive up house prices. It’s as simple as that. And while the information, as detailed below, about foreign ownership is opaque, we do know that wealthy foreigners are spending billions a year in the Australian property markets, often secretly *and* illegally – which is a problem too.
We also know that much of this investment is just wealthy foreign investors parking their money in a safe place. Much of it is not even let on the rental market. Typically, this kind of buyer doesn’t need the income, they just need to sneak it out of China or wherever else to diversify.
Tax or ban?
The Coalition policy appears to mimic Canada where a two year ban has been imposed, due to precisely the same factors making property unaffordable here: rising interest rates and building costs, investors competing with first home buyers.
In Singapore, they have both legislative restrictions and a licensing regime to control foreign ownership (their casino regulation is superior to ours too). Stamp duty is 60% for foreign buyers of residential property versus zero for citizens. So it is not banned but taxed heavily.
Mind you, If the major parties were predisposed go flat chat, really address the problems in housing, they have all the measures at their disposal: reform foreign ownership a la Singapore, reform to negative gearing, axe the CGT discount, return to building social housing, fix the Airbnb tax rort. The Airbnb tax rort is an even easier one, and was raised by Albo earlier this year, but faded away.
Sadly, there is not the political will to do any of this, despite these solutions staring everybody in the face for a decade while residential housing returns soared past returns on the share market. The share market, being higher risk, should deliver higher returns. So the excessive returns in residential property tell us something is wrong.
The market is flawed, skewed towards investors over those wanting to own a home. And it is fair to say that a roof over a citizen’s head, like water and electricity, is probably a human right. It is certainly a duty of government in a country as rich as this.
Another two key issues with foreign ownership is the failure to deliver money-laundering reforms promised 17 years ago, and secrecy.
Last month, Attorney-General Mark Dreyfus finally introduced his money laundering Bill into Parliament to address AML-CTF Tranche II reform, that is, to stop property agents, lawyers and accountants from laundering money.
It was promptly kicked off to a Senate committee hearing by the major parties so that stakeholders could have their say, even though stakeholders have been having their say for 17 years, hence the delays. The Bill included provisions for a Beneficial Ownership Register – a terrific move to lift the veil of secrecy over property owners in Australia.
That transparency measure has been talked about for years but it may struggle to pass even if some form of Tranche II AML-CTF laws make it through after the next period of dithering.
It is likely there will be something next year though as Australia faces being relegated to the world’s ‘Grey List’ for recalcitrant nations refusing to adopt global standards required by the Financial Action Task Force.
Yes, we are close to being lumped with Yemen, Haiti and Burkina Faso as failures on terrorist financing and money laundering.
Australian remains not compliant with world standards.
But at least The Congo, Mali and Syria and other grey-listers have an excuse, they are either war torn or poor.
FATF report
There has been a flood of foreign money into Australia’s residential housing market over the past two decades, incidentally while governments have shilly-shallied over dithered over money-laundering reforms. A longer ban on foreign ownership needs to be in the public debate, certainly more than politicians getting upgrades from Qantas.
Michael West established Michael West Media in 2016 to focus on journalism of high public interest, particularly the rising power of corporations over democracy. West was formerly a journalist and editor with Fairfax newspapers, a columnist for News Corp and even, once, a stockbroker.
