How many foreign buyers are there in the Australian residential market?
Well the simple answer is: no one knows.
The issue of foreign investment in Australian residential property markets has been thrust into the spotlight over recent months with speculation mounting that foreign buyers are distorting Australian home values due to the their demand and spending power.
The problem largely comes back to a relaxation in the Foreign Investment Review Board (FIRB) criteria, which changed in December 2008 to provide foreigners on temporary visas more freedom in purchasing Australian real estate. The changes came into effect on March 31 of 2009.
The complete list of FIRB exemptions are provided here.
The exemptions that are most relevant to this issue are in relation to temporary residents. As taken from the FIRB web site, temporary residents are exempt from any restrictions if they are purchasing certain residential property as follows:
- single block(s) of vacant land;
- new dwelling(s); and/or
- a second hand dwelling to be used as your principal place of residence (including if it is going to be demolished first then redeveloped);
FIRB’s definition of a temporary resident can be found here. In simple terms, this means that anyone with a temporary visa of at least 12 months can buy a property in Australia. And they don’t have to notify the Government that they are doing so.
Additionally there is no longer a $300,000 cap on their purchases, which means the premium housing market is likely to be a popular target for any wealthy 12 month plus visa holders.
These relaxations particularly relate to overseas students who are typically granted a visa for more than 12 months and overseas business people who are in Australia for more than a year.
When the rules were first changed, the Government issued a press release (see here) outlining the changes and asserting the benefits that such changes would bring, including a more streamlined administrative system for residential housing purchases by foreigners and improved flexibility for foreign buyers. The last sentence in the media release states:
“The Government will monitor the changes to ensure these continue to be in the national interest.”
That doesn’t seem to have happened.
For an issue that is so important, amazingly, there is no hard data being captured on how many overseas buyers are active in the Australian market, and the Government appears to have no idea what the scale of overseas buying is. All we have to go on is the anecdotal comments from industry professionals and those active in the market.
With such aggressive media attention now bringing this issue into the spotlight and with housing affordability once again becoming a pressing issue, it is highly likely we will see some type of action from the Government. Who knows… the rules may not need to be wound back. But without question there needs to an improvement as to how foreign buying in our housing markets is monitored, measured and controlled.