Catherine Cashmore appeared on Channel 9 news last night to discuss the fact we are building the wrong type of stock to meet our growing community. The report compared the 80,000 apartments due to come onto the market over the next few years with the 80,000 vacant properties we identified in the Speculative Vacancies report.
As the Channel 9 segment alludes, the concern over foreign investment continues. We suspect the recent Victorian government populism in increasing land taxes and stamp duties on foreign investors will lead to a number of recent citizens with strong family networks to become very large property owners, very quickly. ie the foreign land tax will be avoided by Australian citizens acting as buying agents for international interests.
This policy populism is developing. Yesterday I was interviewed by Richard Glover’s Drivetime on ABC NSW (702 AM) on the proposed land tax on foreign investors. Similar to Victoria’s recent clampdown on foreign investment, it is rumoured there will be a similar charge announced during the Sydney budget. Listen to the audio from 5.40 mins
NSW residential land prices increased a mere $301 BILLION in the 14-15 financial year. That’s four times the NSW budget of some $70 billion. NSW First Home Buyers are today expected to borrow $403,000, up from $304,000 in 2010. Accompanying that price tag is a 1 hour commute each way to work.
Something has to be done about the advantage mobile capital has amidst a tax system encouraging land hoarding. We hope that populist reforms on foreigners are just the start in rolling back the advantages ALL property investors enjoy. New Zealand’s Prime Minister John Key recently floated a similar concept.
The key point to recognise is that foreign investment in land does little to add to the the productive economy. Instead, competition for scarce locations ensures escalating land prices and accompanying debt levels. This drains the economy, particularly when so many investment properties are held empty. A tax system to discourage such property hoarding will channel money away from land and hopefully towards the ‘innovative economy’ we hear so much about.
Other countries impose fees on foreign investors buying local land – and it does not put them off. Rather the effects are positive in giving a proportion of the gains they receive back to the public. A win/win for all. That is Prosper Australia’s challenge, for Joe Public to realise this revenue source can act to give workers a tax cut.
A broad-based Land Tax is needed so that both local and foreign investors, alongside property owners, contribute evenly, according to the locational services they enjoy. To get to this stage, a sustained public education campaign is needed to counter the nightly reality TV real estate fix.