Opinions mixed as foreign investment comes under review

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‘‘A generation of Australians are being priced out of the property market. Many face a life time of renting.’’

These were the words, spoken by Credit Suisse analysts Hasan Tevfik and Damien Boey, that contributed to calls for a review of foreign investment protocol.

The comment was part of a Credit Suisse report that estimated 18% of new homes in Sydney and 14% in Melbourne are being purchased by Chinese buyers.

The report showed that in the past seven years, Chinese buyers have invested $24 billion into the Australian property market, with $5.6 billion spent in NSW alone in 2013.

Credit Suisse also reported Chinese buyers were investing $5.4 billion per year in Australian real estate –  buyers included investors, developers and temporary residents.

The recent report, which used data from the Australian Bureau of Statistics and the Foreign Investment Review Board, also predicted the Chinese could buy up to $44 billion worth of Australian real estate by 2020.

The report sparked calls for an inquiry into Australia’s current foreign investment framework to examine whether the objective of the policy – to create housing, was being met, or if an influx of Chinese and other foreign investors were squeezing local buyers out of the market.

Chair of the House Economics Committee Victorian Liberal MP Kelly O’Dwyer, told media the original mandate for foreign investment in residential real estate was to increase dwelling stocks and add jobs in the Australian construction industry and the inquiry will determine whether those aims are still being achieved.

"The Reserve Bank Governor made some comments in the recent parliamentary oversight hearing of the Economics Committee, where he said all foreign investment does have an effect on prices," she said.

"We want to know though whether or not the current laws and the current framework is being properly adhered to and whether it is a truly distorting impact.”

However, Australian China Business Council president Duncan Calder has shunned concern, saying Chinese investors have not squeezed out local buyers, but helped boost the Australian housing market – a sentiment backed by the Foreign Investment Review Board.

Recent Foreign Investment Review Boards statistics show a drop of 18% in overall foreign investment in the Australian property market in the past two years, prompting some to say concerns over foreign investment are being overblown.

The government will release the terms of reference for the inquiry tomorrow.
 
 A snapshot of overseas investment:

Source:Foreign Investment Review Board.
 

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Comments
  • Sara says on 18/03/2014 04:38:52 PM

    Being Australian and a first home buyers in Sydney we completely agree with the theory that we are being ‘squeezed out’ by Chinese investors. In fact we are being more than just squeezed!

    We have tried to take advantage of the First Home Scheme and have a double (more than average) incomes and no kids and still are unable to get on to the property market. This scheme has put us in the same market as the Chinese investors who buy property based on their economy – not ours.

    Apartment developers proudly boost about properties being advertised and sold in China even before coming onto the market here in Australia. This leaves us, Australians, renting of Chinese investors.

  • Bill says on 18/03/2014 09:58:35 PM

    Under no circumstances should non-citizens be permitted to own any property or land, including farm land and mines, in Australia. If foreigners want to "invest" in this country, then they can take a lease up to 99 years. There should also be a limit of 49% share ownership of a company. It's hard enough even to get some Aussies to care about what happens in this country, so you can be pretty sure that foreigners care even less. Holden and Qantas are the 'writing on the wall'. Before too long Parliament House will be put on the market and our own government will have to lease it back from an overseas owner.

  • Rav Shrot says on 20/03/2014 06:23:32 AM

    The problem is not the foreigners buying property but lack of available property- The Australian government does not release land and has created an artificial shortage that has resulted in lack of affordable housing. New construction is so difficult because of red tape with permits etc that no ordinary person can attempt to build new. Yet the Australian government is looking for foreign cash investment and pricing its own native white population out of the affordability range.

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