Scores of foreign investors are acquiring property in highly desirable metropolitan areas, only to leave them unoccupied. This trend is exacerbating Australia’s housing affordability crisis, according to Douglas Driscoll, chief executive officer of Starr Partners.
Driscoll estimates that the number of uninhabited dwellings in Sydney alone is more than 200,000. “We know that the current affordability crisis is a matter of simple economics – demand heavily outweighs supply. Foreign investors are only exacerbating the problem by buying properties and leaving them vacant,” he said.
In 2011, there were nearly 120,000 unoccupied dwellings in Sydney alone. In the six years that followed, foreign investment in property has risen dramatically and completely transformed the market.
“Foreign investment in our property sector only gained genuine momentum in 2012 and in just a few short years we are already seeing 10-20 per cent of property being sold in some pockets to offshore buyers, which leaves a lot of Australians on the sidelines, Driscoll said.
Flood of new apartments will lead to oversupply
The Reserve Bank recently warned that a flood of new apartments hitting the market would result in oversupply and other negative consequences. The RBA pointed out that residential approvals have been almost 50% higher across Australia than their long-term average during the past two years.
High levels of apartment construction were creating risks in inner-city Melbourne and Brisbane, according to the Reserve Bank. Meanwhile, an oversupply of units in some inner-city suburbs in Sydney could expose investors to significant risk, according to Herron Todd White (HTW).
Indeed, HTW has already detected a number of valuations for new units upon settlement that did not meet their off-the-plan prices.
Proposed solutions: Financial penalties or property taxes on unoccupied dwellings
To help more Aussies enter the property market, Driscoll said a percentage of dwellings within all new developments should be sold to Aussie residents.
“While residents struggle to purchase, offshore buyers have properties lying dormant. Investors don’t get capital gains tax concessions if the property is uninhabited for more than 12 months, which is a good start, but what about non-residents? I think the Government should introduce significant financial penalties or inordinate property taxes for any property owned by a non-resident that is known to be empty for more than 12 months – to put unoccupied properties back on the market for residents to purchase or rent,” said Driscoll.
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