THE REPORT ON FOREIGN INVESTMENT IN RESIDENTIAL REAL ESTATE WAS RELEASED LAST WEEK AND MADE SOME SENSIBLE OBSERVATIONS, INCLUDING THE NEED TO IMPROVE THE CURRENT INEFFICIENT PROCESS OF DATA COLLECTION AND TRACKING OF BOTH THE VOLUME AND IMPACT OF OVERSEAS FOREIGN INVESTORS ON THE PROPERTY MARKET. WHILST THE FOREIGN INVESTMENT REVIEW BOARD (FIRB) RELEASES DATA, IT REFLECTS APPROVALS NOT PURCHASES. AUSTRALIA IS NOT ALONE IN BEING CHALLENGED BY INADEQUATE DATA ON FOREIGN INVESTMENT WITH THE ENQUIRING LOOKING AT THE SITUATION IN A RANGE OF COUNTRIES INCLUDING NEW ZEALAND, CANADA, SWITZERLAND AND ENGLAND.
The Report on Foreign Investment in Residential Real Estate was released last week and made some sensible observations, including the need to improve the current inefficient process of data collection and tracking of both the volume and impact of overseas foreign investors on the property market. Whilst the Foreign Investment Review Board (FIRB) releases data, it reflects approvals not purchases. Australia is not alone in being challenged by inadequate data on foreign investment with the enquiring looking at the situation in a range of countries including New Zealand, Canada, Switzerland and England.
Even with the weakness in the data, the Committee was satisfied that foreign investment in Australia’s residential property market brings benefits. Importantly, the committee was satisfied, from the evidence received, that foreign investment is not causing market distortions for first homebuyers. They found that the foreign investment levels are not large enough to impact on the market and overseas buyers mainly operate at a different price bracket from first home buyers and buy different types of properties. The supply of dwellings, rather than competition from foreign investors, was seen as the major driver of housing prices with the call from industry groups to liberalise the supply side of the market.
The net positive view of foreign investment in residential property is based on most activity occurring in the new dwelling market, therefore increasing supply to the rental market and stimulating the economy through construction jobs with their strong multiplier effect. By law non-resident foreign investors are limited to the purchase of new product whilst temporary residents on visas of more than twelve months can purchase one existing home but must sell it when they leave Australia.
For Western Australia, foreign investment in residential property is not huge. FIRB data shows that, whilst we receive 10.5 percent of the applications, we only receive 5.2 percent of the dollar value; less than a billion dollars in 2012-13.
At the moment data is not available on how many of the 23,270 primary 457 visa applications received for WA over the two years to June 2014 converted to home ownership. According to the ABS, in that two year period WA had 70,000 existing house transfers and just over 41,000 new dwellings commenced so, in theory, visa holders could represent up to one in five purchasers. That figure is not correct but what the actual figure is nobody seems to know, but it is positive that data gaps are being identified.