The review of foreign property purchases finally seems to be kicking goals, but the poor government’s not scoring any points.
If you know me, it’s not often I get out the poms-poms and the tutu and become a cheerleader for the government. But credit where credit’s due, and it seems that ball’s coming clean off the boot when it comes to the review of foreign purchases of property.
It’s taken a while, and the needed changes were obvious, but you know, any step in the right direction’s a good one. We don’t set the bar too high anymore. And on Abbott’s timetable, good government only started in the last month or so.
But the proposals they announced last week (launching a month of public consultation) are solid.
The gist of it is that the government is going to get serious about monitoring foreign purchases of property. There’s no changes to the rules, but there seems to be a strong intention to finally make sure that the rules are being followed.
And the enforcers (likely to move from FIRB to the ATO) also look set to be given some real teeth. They’re talking about the power to enforce sales, and penalties of up to 25% of the sales price for deliberate breeches.
The other aspect that’s worth applauding is that the government is asking foreigners themselves to fund the monitoring and enforcement. Foreigners will pay a fee of at least $5,000 per property, increasing on a sliding scale as properties get more expensive.
If all this sounds familiar it should. I’ve been arguing for measures like this for at least a year now, if not more. And I think the 25% fee comes straight from a reader’s comments.
But these measures are long over-due, and there was a pretty wide consensus on what needed to be done. We needed better data so we actually knew what was going on, and we needed to make sure that our rules, which are very reasonable I reckon, were actually being enforced.
So this is legislation that is clearly in the common interest, leveraged off a near consensus on what needed to be done. It’s a gimme from 10m out, straight in front, but still, this is what good government looks like.
But you wouldn’t know it.
The media has turned on the Abbott and co. like an ungrateful pit-bull. Now they can’t do anything right.
There was your classic playing the man. Some said Abbott was trotting out the race card to distract us from leadership shenanigans. Give me a break. This issue has been on the cards for ages, and is the result of some tidy work by Kelly O’Dwyer’s review over the past couple of months – long before Abbott’s headache’s began.
Others questioned Hockey’s sincerity, wondering if it was an attempt to ‘milk’ foreign investors to patch up the budget.
Hardly. It’s relatively small fish. At most it might raise $200m. Every bit helps, but it won’t carry enough weight to help rebalance the books.
And I agree with Hockey’s point that right now, foreigners don’t pay anything, so Australian tax-payers are effectively left picking up the bill for monitoring and enforcement.
I could think of better things we could be subsidising with that money.
And in a shame-less about face, the media’s now running a scare campaign on how these fees are going to deter foreign buyers and create a negative “shock” for the market.
It’s a bit rich – coming from media that’s been happy to run the ‘foreigners are stealing your children’s homes’ angle (also not true) for the past few months.
I just can’t see $5 grand having that much impact on the marginal foreign buyer. Even for bottom-end, off-the-plan shoe-boxes, $5K isn’t really going to be that much of a disincentive.
I mean, your ultimate purchase price could easily jump around $5K on exchange rate movements, depending on what day of the week you bought.
And Terry Ryder was happy to stick the boot in as well, suggesting that the changes were unnecessary, and were just another way for government’s to milk the property cash-cow.
While it’s true that governments are overly-reliant on property taxes, like that stupid stamp-duty, hopefully we should see the money raised given directly to enforcement – not just to general spending.
And I think there is a clear and present need for these changes.
Because they get to the integrity of the entire property market. Most systems in the economic world only work because people have faith in them.
It’s like traffic lights. If the rules around traffic lights were weakly enforced, there’d be carnage on the roads. You’d be much more cautious at intersections if you weren’t 100% sure that people were going to be following the rules.
Traffic would grind to a halt.
The modern financial world is a super-highway. We’re only able to achieve the amazing heights of the modern economy because people have faith in the system.
You have faith that banks won’t run off with your money, that you can trust the people you deal with, and that if someone breaks the rules, there are recourses available to you.
The rules, and the enforcement of the rules, creates the faith needed to keep the whole show on the road.
So have a strong set of rules and make sure everyone is playing by them, or don’t bother having any rules at all.
But a lackadaisical approach, which is what we’ve had up until now, just creates ambiguity and confusion, and distrust and ill-feelings.
Things needed to change, and I think finally, they’ve changed for the better.