Amidst ongoing debates on Australia’s housing sufficiency, the Housing Industry Association (HIA) has voiced concerns over recent tax proposals affecting foreign investments in the real estate sector. Tim Reardon, the Chief Economist at HIA, has challenged the effectiveness of increasing taxes on foreign real estate investors as announced by Treasurer Jim Chalmers MP on December 10.
Reardon emphasises that such measures could impede efforts to address the acute housing shortage in Australia. He states, “In order to address the acute shortage of housing stock, governments need to attract more foreign investment, not increase taxes on them.”
Contrary to popular belief, Reardon argues that the existence of vacant homes and the role of foreign investors have been greatly misunderstood as contributing factors to the housing shortage. According to census data analyzed by the Australian Bureau of Statistics (ABS), approximately 10% of homes are reported to be vacant, a figure consistent since 1986 and comparable with other developed economies. Reardon points out that these include holiday homes, properties for sale or under renovation, and homes in areas with fewer job opportunities, rather than a stockpile of unused residences.
Reardon noted, “Each census the Australian Bureau of Statistics reports that around 10 per cent of homes were vacant on census night.” He further clarifies, “It is a fallacy to think that 10 per cent of homes are unoccupied and unhelpful for policy makers to suggest that homes are being withheld from the market when a core problem is that governments continue to increase tax imposts on hew homes.”
Furthermore, he addresses the significant decline in new apartment constructions, which he attributes to the introduction of what he describes as punitive taxes on foreign investors by the state and federal governments since 2015. This, according to Reardon, has led to the withdrawal of foreign investors from the market, subsequently halving the volume of new apartment constructions compared to 2016.
“If governments tax something, there will be less of that item,” states Reardon, indicating that increased taxation is an apparent deterrent for potential foreign investors.
Reardon also highlights that foreign investors typically do not occupy the new homes they build, nor can they transfer them out of Australia, making them central in addressing the nation’s housing shortage.
“One in ten Australian detached homes are built by a foreign owned company. These companies are finding it increasingly difficult to invest in Australia and build new detached homes, due to the punitive tax’s governments impose,” he elaborates.
He concludes by urging the government to not only reduce the tax burden but also facilitate local councils in investing in infrastructure. Acknowledging that the Federal Budget changes will aid domestic institutional investors, he insists that their participation is yet to compensate for the gap left by foreign investment withdrawal.
Reardon’s comments certainly cast light on the complexities involved in the housing shortage and invite further reflection on the policies steering Australia’s housing market’s future.