Australians are calling for the government to follow in the footsteps of Canada after the North American country introduced a controversial ban on foreigners buying properties.
However, an expert has warned this is simply a “bandaid solution” to a much larger problem and does not recommend Australia do the same.
The temporary two-year measure was proposed by Canadian Prime Minister Justin Trudeau during the 2021 election campaign when soaring prices and a housing crisis put home ownership beyond the reach of many Canadians.
Several exceptions in the act allow individuals such as refugees and permanent residents who are not citizens to buy homes.
Major markets such as Vancouver and Toronto have also introduced taxes on nonresidents and empty homes.
On Sunday, the ban took effect, and has been met with a slew of enthusiasm from Australians also caught in the throes of a housing crisis.
“Fantastic! A policy we need in Australia – also the punitive taxes on empty homes and full-time AirBNBs,” one person wrote on social media.
Rental markets are the tightest they’ve been in years and comes as Australia’s median weekly rent now sits at $520 for houses and $460 for units.
As for homeowners, there are anecdotal reports of people being forced to secure a second job to afford their home loan. The mortgage burden has reached 177.5 per cent of disposable income, with households now at increased risk of becoming overextended due to mortgage liability, according to the MasterCard Economics Institute.
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Unfortunately, Canada’s ban could have the opposite effect on housing affordability in other countries, according to an expert, as it will push more foreigners into buying houses in other foreign markets, including in Australia.
PropTrack director of economic research Cameron Kusher said many of Canada’s foreign buyers may turn their attention to Australia.
“We know that Canada has been one of the most popular places for investment for foreign buyers, particularly Toronto and Vancouver. A lot of that investment has come from China,” he told news.com.au.
“If for the next two years people can’t invest in Canada, they’ll look for alternatives.”
Mr Kusher acknowledged that Australia had similar housing problems to Canada but he said this was the wrong way to go about it.
“Canada has their reasons for going down this path. I don’t think it’s a particularly sensible reason,” he said.
Labelling the policy a “bandaid solution” and “a populist solution”, he added: “Certainly foreigners have more buying power than first-time buyers. But I don’t think it’s the crux of the issue. These things do tend to play up on xenophobia a bit.”
Instead, Canada and Australia would both benefit if their governments increased housing supply by stepping in and building more houses, according to Mr Kusher, as a way to actually curb the rising prices so that supply was more balanced with demand.
“Foreign investment is a small part of the housing market,” he said.
“Generally speaking, I would say this is a bad policy and is not something Australia should do.”
Other Australians, however, called on the Government to implement the rule Down Under.
“Should Australia do the same? Our market is also exposed to international profiteers and corporate investment in property,” tweeted one person.
“Brilliant, hope this comes to Australia,” said another.
“Fantastic idea if it is done well,” commented a third.
One man even wanted to take it a step further by forcing foreigners who currently had properties to sell them on.
“I fully support this idea,” he wrote online. “Put a total freeze on all new foreign investment in all types of real estate in Australia, and give three years for all foreign owners of domestic property to sell. Only exception is if the property is the foreign owners’ PRIMARY place of residence.”
What are current rules regarding foreign property ownership?
Contrary to popular belief, Australia’s rules around foreigners buying up housing stock is not a free-for-all.
Non-Australians can only buy residential property if it is a new building or a vacant lot.
They are unable to buy existing houses or units unless they undergo a massive renovation that will ultimately increase the housing stock — such as turning a house into a duplex.
The logic is this way foreigners are not taking away housing opportunities from existing stock that an Australian resident otherwise could have lived in.
On top of that, the Foreign Investment Review Board (FIRB), which is in charge of assessing foreigners buying property in Australia, also charges an application fee as well as a Foreign Citizenship Stamp Duty, which is as well as normal stamp duty fees incurred.
In the March quarter of 2021, at the peak of Australia’s property boom, a NAB survey found that foreign investors made up only 3.7 per cent of new home sales and 2.2 per cent of established homes.
Foreign investment fell to record lows during the pandemic amid border closures and is still bouncing back to pre-Covid levels.
In 2021, Australian house prices were turbocharged and rose nationally by a whopping 25 per cent.
However, this year, some capital cities have shed as much as 6 per cent of their gains from the previous 12 months.
A survey last year from the University of Technology Sydney showed that around 80 per cent of Australians blamed foreign buyers, from China specifically, for driving up housing values.
– with AFP
