Treasurer Jim Chalmers said on Sunday that the government only had a “rough sense” of the numbers and one of the proposals he announced with Housing Minister Julie Collins was to boost Australian Taxation Office funding to better assess the number.
But interest in buying Australian residential property by China-based buyers is increasing. Foreign Investment Review Board figures for the June quarter, the latest to date, show approved residential purchases rose more than 40 per cent in 2022-23 to $3.4 billion, more than to any other group of foreign buyers.
There were 826 approvals for purchase worth $1.1 billion granted to China-based buyers in the June quarter alone, followed by $600 million-worth to Hong Kong-based buyers, who are counted separately in the FIRB data.
While Mr Ho said the higher vacancy fees would have a big impact by raising the holding costs of Australian property, Real Estate Institute of Australia president Leanne Pilkington said they would make little difference.
“People buying from overseas are buying for very good reasons,” Ms Pilkington said.
“Sometime their kids are studying here; they might need safe haven for their money. The fact it is going to cost them more is not going to change their buying habits in the majority of cases.”
The measures would raise more revenue – as much as $500 million, Mr Chalmers said – and it was up to the government to ensure that any such extra funds raised were channelled into boosting the stock of rental housing, Ms Pilkington said.
AMP chief economist Shane Oliver was blunt about the effect of the measures aimed at foreign buyers.
“It’s something that is populist policy,” Dr Oliver said. “Foreigners are not the cause of the problem. We went through the pandemic and there were no foreigners buying property and prices still took off.”
Australia’s “basic problem” was its shortfall of homes, which showed why the national housing accord target of 1.2 million new housing units by 2029 was so crucial, Dr Oliver said.
“If we can get to 1.2 million homes we’ll be on the way to solving the problem,” he said.
On Sunday, the government also said foreign investors in build-to-rent (BTR) projects would be charged the lowest possible investment application fee.
This would end the current imbalance that meant a proposed $50 million investment would – for example – draw a $1.1 million fee on land zoned residential purposes but only $132,000 on land zoned for commercial use.
But even that would do little to boost rental stock without resolving more significant hurdles such as planned so-called thin capitalisation rules aimed at curbing excessive tax deductions, the Property Council of Australia’s group executive for policy and advocacy Matthew Kandelaars said.
The industry also needed to see legislation that followed through on the May budget promise to halve the 30 per cent withholding tax on foreign investment in BTR to 15 per cent, and to see whether that reduction would come with a requirement to include affordable housing, he said.
“Reduced application fees are absolutely welcome, but if we don’t get the fundamental taxation settings right to encourage investment, we won’t be receiving those applications in the first place,” Mr Kandelaars told the Financial Review.
“Fixing the thin capitalisation regime and getting the details of the BTR mix withholding tax rates will be the driving factors in unlocking supply through institutional investment in the BTR sector.”