Is foreign investment good for Canberra?
Foreign investment activity has reached a high point. In large new developments up to 30 per cent of new residential developments are being purchased by offshore investors. In Victoria and New South Wales, the number of foreign investment approvals for purchase of new dwellings has doubled in the last twelve months alone.
The ACT is bucking the trend, with foreign investment heading south. This is not something we should celebrate. In fact, it is something we should be looking to reverse.
You could be forgiven for thinking that foreign investors are snapping up all available property, driving up property prices and crowding out first-home buyers. However, this is far from reality.
Under Australia’s foreign investment laws, non-residents can buy newly built dwellings – after gaining approval from the Foreign Investment Review Board – but they cannot buy established homes.
This policy was designed to increase the supply of new housing, bringing with it benefits to the local building industry and its suppliers.
Foreign investment is effectively a pre-commitment that helps projects, such as large-scale apartments, get off the ground.
Ultimately, this means more homes to meet the growing demand and to tackle the current undersupply.
On a national level the policy appears to be working. The latest Australian Residential Development Outlook forecasts that 180,000 new home starts will be completed by June next year – about 30,000 more than the average of recent years. This is good news for anyone wanting to buy a home.
Offshore investors aren’t crowding out locals nor preventing first-home buyers from ever realising their own Great Australian Dream. Around 80 per cent of first home buyers purchase established homes.
The Residential Development Council forecasts that just eight per cent of homes currently under construction will be purchased by foreign investors. The purchase price for approvals granted by the Foreign Investment Review Board is closer to the $1 million mark – certainly not first-home buyer territory.
In the ACT, where building approvals have declined year-on-year despite national approvals rising, foreign investment interest can help us boost a sluggish economy.
Each new housing project in Canberra provides work for around 40 trades, sub-trades and para professionals, boosting jobs, Federal GST payments and the ACT Government’s coffers into the bargain.
Catherine Carter is ACT Executive Director of the Property Council of Australia