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.
Raaoar.
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.
Greg says
ANY investment (foreign or local) is a good thing provided it results in more homes being built. Blocking foreign buyers from purchasing pre-existing dwellings should, in theory, remove some of the upward pressure from prices.
al says
” 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 real world we live in has never been able to generate a faultless set of principles that DO actually have any real teeth when it comes to processing any of these three areas of financial processes – there are always too many ‘slide aways’ that either only part punish ‘slap wrists’ or end up just re-tweeking the too soft original ‘not originally clear or strong enough’ so said ‘rules’ that became the original platforms supposed to protect matters.
Nothing has really changed except the down padding in the o/s investors chair cushions.
al says
Nothing has really changed except the down FEATHERS padding in the o/s investors chair cushions.
Traveller says
I agree that policing is absolutely necessary. I like your traffic analogy. Just see how long it takes to clear a junction in Bangkok, Manila or Jakarta after the lights change – unless a policeman is watching.
I’d like to see the sale of agricultural land to foreign investors stopped. Chinese are buying up farms, bringing in Chinese workers from China on temporary visas and exporting the produce to China. There is little or no benefit to Australia. A foreigner cannot buy land in China – it all belongs to the state!
al says
Absolutely STOPPED is the answer in regard to farming land – if they REALLY want ANY then they can on only lease it ….. NO perpetual basis … IF our own farmers have got to the point that they cannot financially continue due to our own countries financial problems or higher wages or the grand daddy of all the worlds ‘financial inequity’ etc ..etc then the last thing this country needs is any foreign investors having title over our farming properties. !!
Suzsi Welch says
I am very pleased. Newspapers will invent bad news if there’s a bit of a slow day. Well done!
Just remember, Chinese can’t buy land IN THEIR OWN COUNTRY! It’s just not for sale, they can only lease it. They invented the phrase: Sell the Farm, for a reason.
Robert says
I’m interested in living and investing here as well as in the US. Land use and development, resource development, policy development, along with the human element; It’s a dynamic and multi-faceted issue. The underlying issue for me is responsible stewardship of the land by whoever owns it as a legacy for the future. Short sighted actions of any type only compound the challenges and the impacts on all who rely on the land directly for their livelihood and sustenance. I am all for sound, no-nonsense policies that are clear enough to be understood by an eighth-year student and that create real opportunity for growth and development of human and natural resources without abusing either.
al says
we have a lot of politicians in this country that talk ? like you … it may be seen/said your views do not not really offer any clear direction nor propound any clearly functional terms of what may be your methodology of “growth and development of human and natural resources without abusing either” … ie seems: politicians generally sit on the fence and or propose of worst possible options for ‘fixing’ problems by using the huge resource base of low income people to financially offset many previous ‘poor slide around policy’ issues.
When the very people who work and live and truly have long supported this country’s survival and enormous prosperity – in the worlds fastest development and prosperity of any country in the world – all farmers – in all categories in this countries are entitled be fully supported to maintain and ensure that their heritage is maintained in support of this country as a first priority. They are not commonly in their work for ‘sitting on their bums’.
Global trading has done nothing and the worst for Aussie farmers, why we accept poor quality frozen bags of ‘crap’ into this country via giant corporate co’s -v- our own real live food is beyond me ! … Corporate business ruins even our daily needs/supply of food. !
I have nil against importing anything that we cannot source from our own country but what we must do is NOT destroy the very hearth of our own capacity to feed ourselves, from within this country. We never needed to bring in crap food from O/S never should.
Overall it does appear (if confused) your views seem support.. “Short sighted actions of any type only compound the challenges and the impacts on all who rely on the land directly for their livelihood and sustenance..” as in that context I agree/accept there is potential for options of exploring various alternatives that could generate mutual accord methods for alternative land use agreements to be explored but not at the expense of allowing our own carefully maintained ‘bread bowl’ real estate to become possessed by any international circumstance. When anyone sells the land that puts food in their own mouth the end of the past struggles of those who have lived them may be closer than the front door of tomorrow struggles for them but the reverse of what was just noted is what the whole country is actually going to arrive at … sooner or later.
One significant financially successful precedent is all that it takes to make the many of the others to say (quietly to spouses and kids) well looks like we could do ourselves a favor and get out of not being appreciated and not being supported and its only getting worse – what about selling up and doing ok on a one time only opportunity? Who would say no?
Cheap labor O/S … crap frozen food with no life force nor nutritional value whatsoever is now almost all of what we have as the most access-able option. If you grow own food will know what I am saying is beyond dispute, many supermarket vegies’ are dead on arrival.
Selling our farming land to any O/S investor ends our entire Gallipoli history, sovereignty.
y’s –