Foreign Investment in Australia’s Residential Sector could be discouraged through excessive fees

The Australian Government’s Options Paper on Foreign Investment could send negative signals to offshore investors through excessive fee charges, says the Urban Taskforce.

“Australia’s growing population will need a significant increase in housing supply particularly in cities like Sydney,” says Urban Taskforce CEO, Chris Johnson. “We need the current level of foreign investment to continue so that more dwellings are built but the high fee level proposed for offshore investors could deter their interest in Australia.”

“Foreign investors have the whole world to invest in and they are more likely to go to countries that welcome their funding than those that require significant fees. The proposal for a fee of $5,000 for real estate valued up to $1 million is five times what the industry was expecting.”

“The Urban Taskforce urges the Australian Government to look towards a lower fee so that the current flow of funds from offshore can continue to support the supply of housing. The rental market has grown significantly over recent years underpinned by a strong investment sector that includes foreign investment. A reduction in the size of the housing investment market will only lead to less production and therefore an increase in housing costs in a sellers’ market.”

“Many large apartment projects are only becoming financially viable through foreign investors purchasing a percentage of units that are then added to by local purchasers. A reduction in foreign investor purchases of apartments could tip some projects into a less feasible situation therefore reducing supply even further.

“Importantly Australia should be sending a welcoming message to foreign investors particularly at a time when we need more housing to accommodate population growth.

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