There is strong opposition to foreign house and apartment buyers once again becoming prevalent. Many seek to counter this, especially since it assumes a near racist paranoia centered on Chinese buyers. Under closer examination many of these are in fact Australian natives.
David Uren has a piece in the Oz today addressing the issue and seeking to deflate the xenophobic undercurrents. He says,
Lost in the current debate is that foreign investment in real estate adds to supply. There is a difference in the rules regarding foreign purchase of established and new property.
Temporary residents may purchase a single established property while they are here but must sell on departure so, with relatively stable inflows and outflows of temporary residents, there is no net effect on the property market. However, foreign residents may purchase newly built property.
Well this is true to a point. And if foreigners came over here seeking to buy up our Tim Tams this would certainly boost production and leave everyone better off. The same should also be true of housing. After all, we have endless amounts of the basic raw material (only 0.3 per cent of Australia is urbanised and even in Sydney we could almost double the number of houses and apartments simply by unlocking land in the market gardening area of the County of Cumberland)
And we can build new houses for $120,000 a pop while the roads, sewer systems, water supply and other utilities cost at most $60,000 a facility. The land itself in its present usage is worth only around $1000 per housing block. But the restraint on availability by planning controls lifts this to $200,000-$300,000 in all our capital cities.
This regulatory land tax originally came about from Stalinists within the planning fraternity teaming up with anti-sprawl fanatics to prevent development and promote the development they themselves prefer to see. This is only possible by forbidding development in alternative new build areas. Where this philosophy has not taken root (e.g. in Germany where there is a constitutional right protecting landowners from the planning blight, or in Texas), new house prices have remained at under $200,000.
Elsewhere, the tax on building at the periphery has a knock-on effect through the conurbation (and in Australia is compounded by apartment – but not house – building under union control, therefore costing far more than they otherwise would)
The original impetus for restraint on land availability has developed its own set of vested interests as developers and new home owners have paid the tax and would be financially impaired if it were suddenly to be lifted.
And so when a whiff of demand increase occurs there is no relief other than a price explosion. While a bonanza for those with their own homes, this seriously disadvantages those without their own homes. But the incumbents hold the political cards and few politicians advocate land deregulation