IF you’re looking for a home in Sydney or Melbourne, chances are you’re feeling frustrated, overwhelmed and irate, priced out of the market you were born to buy into.
Most are quick to blame the deep pockets of foreign investors, with high demand seeing properties sell for hundreds of thousands of dollars over reserve.
Recent figures show one in 10 properties in NSW are being snapped up by foreigners, and with interests rates so low, this trend shows no signs of slowing down.
But there could be a solution. And lucky for us, Canada has already put to the test.
CANADA TAKES A STAND
Vancouver had a 13 per cent foreign investor rate last year, with many apartments sitting vacant because overseas owners weren’t renting them out. So to promote a fairer local market, the government imposed a 15 per cent tax on foreign investment last August — a law that would add $300,000 to the price of a $2 million home.
New figures obtained by news.com.au show that in the four months from August last year, foreign investment in British Columbia is now as little as four per cent.
As a result, house prices in the area fell 5.3 per cent in November — the largest monthly decline since 2012. And from January 2016 to January 2017 house prices in Vancouver fell 18.9 per cent.
“The tax is helping manage excessive demand in the region’s residential real estate to allow the housing market to respond by building new homes to meet local needs,” a spokesperson for the British Columbia Ministry of Finance told news.com.au
“Revenues from the tax are also helping fund provincial housing affordability measures.”
The spokesperson said that prior to the tax being implemented, about 13 per cent of property transfers in metro Vancouver involved foreign nationals.
“Following the tax’s introduction, the level of foreign investment has slowed and become more consistent with that seen in the rest of the province,” she said.
“In December for example — the most recent month for which data is available — the rate was 4 per cent.”
Announcing the measure, the government of British Columbia said the tax was intended to help cool the province’s booming property market, where demand from foreign investors — many from China — had increased the cost of a detached home some 39 per cent in just 12 months.
“There is evidence now that suggests that very wealthy foreign buyers have raised the price of housing for people in British Columbia,” the province’s premier Christy Clark said at the time.
“The foreign buyer tax is intended to make sure we can keep home ownership within the reach of the middle class.
“I make no apologies for that.”
SYDNEY’S STAMP DUTY TUG-OF-WAR
Back in NSW, new data from the Office of State Revenue has shown that in the three months to September, foreign nationals accounted for 11 per cent — or 2995 — of residential property purchases in NSW, compared to just 7.51 per cent of first home buyers.
NSW Labor is pushing for the surcharge to be lifted from four to seven per cent for foreign investors on residential homes.
“Evidence suggests a surcharge on foreign investors will take some pressure off house prices and go a way to levelling the playing field for first home buyers,” Opposition Leader Luke Foley said this week.
While Premier Gladys Berejiklian signalled her government was considering a similar move, she said the jury was still out on whether increasing the levy would help first-home buyers get into the market.
Sydney’s home values have grown 18.7 per cent in the past 12 months alone, with figures showing Sydney has had 8161 new listings in the past 28 days — an increase of 8.5 per cent in the past 12 months.
The property industry has also criticised the push to tax offshore buyers saying it’s not the only solution, and one that would negatively impact the state by reducing the flow of foreign capital.
Real Estate Institute of NSW president John Cunningham said raising taxes was just one possible scenario in what was an incredibly complex issue.
“In Canada they have increased taxes significantly to try and curb that,” he said.
“And because we’ve just had the numbers released that 11 per cent of property owners are foreigners, with 3.3 per cent being Chinese, the big question is — is that significant enough to have a big impact on the market as it is predominantly based on new properties, and the majority of the Australian market is the sale of established housing?
“What is the actual solution to housing affordability is the free and open movement of established housing.”
CUT TAXES FOR LOCALS, SAYS REINSW
Mr Cunningham said if the government was considering increasing taxes for foreign investors, it should also consider decreasing stamp duty for local buyers.
“If we stop the flow of foreign capital that has significant implications too,” Mr Cunningham said.
“Low interest rates are the reason this has actually happened, as well as the fact that people aren’t moving, they are staying put as it is so costly to move.
“Established housing is so tight in the areas people want to live in that the competition is so fierce they just out bid each other, and that is so inhibitive.
“They need to decrease stamp duty for people buying.
“At the moment it is four per cent — which means for the average price of a million dollars people are paying $40,000 on that — we need to decrease that for locals to give people more incentive to move, increase supply and get property transactions moving.”
He said NSW should look into new planning laws recently announced for Victoria, which removes the cap on the number of houses built on one block as long as it has 25 per cent outdoor garden area.
“We need more housing options — that’s the creativity we need instead of just saying foreigners are to blame, let’s tax them more,” Mr Cunningham said.
“Our property economy is one of the safest places in the world to park their money and I don’t think taxes are going to deter that.”
Canadian born Australian resident Chelsea Fauth said she was ‘shocked and dumbfounded’ at the Sydney property market, and said something drastic was needed to help first homeowners get a rung on the property ladder.
“How can somewhere get like this — so out of control — and how come nothing has been done to stop it from getting so out of control in the first place,” she asked.
“Since the government in BC implemented a 15 per cent tax only to foreign investors, Canadians are no longer being out priced on properties.
“It’s reassuring being able to inspect a property knowing that you are up against other Canadians who are looking to buy a place to raise a family in, and not be concerned about the foreigner who is willing to pay more and then never live in it.
“If first home buyers in Sydney are expected to buy in the suburbs they grew up in and have grown to love, something needs to drastically change.”