Developers and apartment buyers have a narrowing window of opportunity before Brisbane's Olympic infrastructure pipeline begins competing directly with residential construction, pushing up costs, tightening labour supply and making new projects increasingly difficult to deliver.

While Brisbane's apartment market continues to benefit from strong population growth and limited housing supply, industry research suggests the years leading up to 2027 could prove to be the most important period for developers looking to secure builders and buyers hoping to purchase before the next wave of price increases.

A new Colliers report, Brisbane 2032 Olympic and Paralympic Games: Creating Solutions, highlights the scale of the challenge. While thousands of new homes are planned across South East Queensland, the Brisbane Olympic Athletes Village alone will deliver more than 10,500 beds during the Games before being converted into around 1,750 to 2,000 apartments. Equivalent to almost two years of typical inner-city apartment supply, the project will also absorb a significant share of the construction workforce and building materials.

The broader construction pipeline paints an even clearer picture.

Construction Skills Queensland's Horizon 2032 report forecasts Queensland's annual construction pipeline will average $69 billion over the coming years before peaking at $75 billion in 2027-28. Demand for construction workers is expected to increase by 17 per cent to almost 150,000 people, with the industry facing an annual shortfall of around 19,000 workers that could blow out to as many as 35,000 during the peak construction period.

The Olympic venues, athletes village and supporting infrastructure will account for billions of dollars worth of work across South East Queensland through to 2032, creating intense competition for labour at a time when Australia's residential construction sector is already under pressure.

[smartcode_project:default project_id=150489 project_image_fid=373834]

Colliers Queensland Residential Director Andrew Scriven said the convergence of these projects is creating a clear window of opportunity for both developers and buyers.

"From 2027 onwards, the market will shift dramatically," Scriven said.

"Labour will increasingly be locked into government-led infrastructure and Olympic projects, which means private residential developments will face higher costs and tighter margins. The developers who move now are the ones most likely to get projects off the ground."

Scriven said the same dynamic would also affect buyers, with fewer apartment projects expected to launch once construction capacity tightens.

"If you're looking to change your lifestyle over the next five years, now is your window of opportunity to buy."

[smartcode_project:default project_id=150713 project_image_fid=373827]

Developers are already positioning themselves ahead of that window.

Following the success of Monarch at Toowong, Consolidated Properties is preparing to launch two new Brisbane apartment projects in the second half of 2026. They include <a href="https://www.apartments.com.au/new-apartments/gloriette-30-bedivere-street-yeerongpilly-qld-4105">Gloriette</a> at Yeerongpilly Green, a 25-storey tower within one of Brisbane's key Olympic precincts, and <a href="https://www.apartments.com.au/new-apartments/castile-47-skyring-terrace-newstead-qld-4006">Castile</a>, a recently approved 25-storey riverfront development at 47 Skyring Terrace in Newstead.

Hutchinson Builders will deliver both projects, with early works already underway at Yeerongpilly and Newstead expected to commence later this year.

The timing comes as Brisbane's fundamentals continue to strengthen, with strong interstate migration, population growth and vacancy rates remaining below 1.5 per cent.

Colliers Queensland researcher Pragya Sharma said Greater Brisbane is forecast to require around 40,000 new apartments between 2021 and 2031.

"There's a real mismatch emerging between when housing is needed and when it will be feasible to build," Sharma said.

"As a result, the period leading up to 2027 presents a key window of opportunity for developers to secure approvals, funding and construction capacity, while buyers will have greater choice before supply constraints intensify."

Colliers research outlines a critical pre-2027 window to start residential projects before labour squeeze: now is the time to buy

Joel Robinson

Developers, buyers on watch in South East Queensland ahead of construction crunch: Colliers

It's taken less than nine months for developer Sherpa Property Group to sell out all 51 apartments in its <a href="https://www.apartments.com.au/new-apartments/flourish-oasis-palm-beach-7-9-sixth-avenue-palm-beach-qld-4221">Flourish Oasis</a> development in <a href="https://www.apartments.com.au/developments/palm-beach-qld-4221">Palm Beach</a>, over a year before its anticipated completion.

&nbsp;

Located at 7-9 Sixth Avenue, the $67 million development has resonated strongly with both local owner-occupiers and downsizers seeking high-quality apartments within walking distance of the beach, dining precincts and everyday amenities.

[smartcode_project:default project_id=151449 project_image_fid=357458]

Christie Leet, Founder of <a href="https://www.apartments.com.au/developers/sherpa-property-group">Sherpa Group</a>, said the sell-out reflected both the strength of the Palm Beach market and the success of Sherpa's community-first approach to development.

"The sell-out of Oasis is a fantastic outcome and reinforces the strong demand we're seeing for thoughtfully designed apartments in lifestyle locations," Leet said.

"From the outset, our vision was to create a development that genuinely enhanced the Palm Beach community while providing residents with exceptional homes and wellness-focused amenities.

"We've been incredibly encouraged by the level of local support throughout the campaign, 72.5 per cent of buyers are locals, with a significant proportion of purchasers choosing Oasis as their future home rather than an investment."

[smartcode_project:default project_id=151449 project_image_fid=357463]

Construction is now progressing following development approval, with trusted builder LPS Group delivering the project and completion anticipated in Q3 2027.

Oasis forms part of Sherpa Group's successful Flourish collection, which has become recognised for its focus on wellness, community and elevated coastal living.

[smartcode_project:default project_id=151449 project_image_fid=357469]

Residents will have private access to a rooftop amenity space featuring a pool, gym, sauna, steam room, hot and cold plunge pools, spa and barbecue facilities.

"The success of Oasis demonstrates that buyers continue to prioritise quality, location and lifestyle," Leet said.

"We are proud to have delivered a project that has resonated so strongly with the market and look forward to bringing Oasis to life for our future residents."

Sherpa recently launched <a href="https://www.apartments.com.au/new-apartments/flourish-soleira-palm-beach-1150-1160-gold-coast-highway-palm-beach-qld-4221">Flourish Soleira</a>, its third instalment of the Flourish brand in Palm Beach following Flourish Oasis and <a href="https://www.apartments.com.au/new-apartments/amargo-6-12-sixth-avenue-palm-beach-qld-4221">Flourish Amargo</a>.

[smartcode_project_cta:default project_id=151449]

Sherpa sells out Flourish Oasis in booming Palm Beach

Urban Property Group's <a href="https://www.apartments.com.au/new-apartments/la-vera-macquarie-park-94-talavera-road-macquarie-park-nsw-2113">La Vera</a> is leading the next phase of Macquarie Park's residential evolution, with the new apartment development set to become the first of several new apartment projects in the precinct to complete.

The 169-apartment building has now topped out ahead of its scheduled completion in the third quarter of 2026, as new residential investment continues to reshape one of Sydney's largest employment hubs into a true mixed-use precinct.

[smartcode_project:default project_id=134951 project_image_fid=368645]

Cox Architecture has designed La Vera to capture the best of its unique positioning on Talavera Road, orienting the building towards Lane Cove National Park.&nbsp;The building features a sculpted northern façade with flowing curves inspired by the surrounding landscape, while its city-facing elevation adopts a more structured architectural expression to maximise skyline views.

"The vision for the project was to conceive a building that adopted an organic and curvilinear form to the northern portion that faces the Lane Cove National Park," <a href="https://www.apartments.com.au/architects/cox-architecture">Cox Architecture</a> Director Felipe Miranda said.

"The residents that reside in the northern portion of the building benefit by having beautifully crafted curved balconies that speak to the natural context and heighten the relationship of their internal living spaces to the external balconies."

[smartcode_project:default project_id=134951 project_image_fid=358802]

La Vera offers a diverse mix of one, two, three, and four-bedroom configurations, with prices currently starting from $740,000. Buyers so far have been a mix of Sydney-based investors,&nbsp;metro commuters, owner-occupiers and downsizers from surrounding North Shore suburbs.

Both investors and owner-occupiers have been drawn to La Vera's proximity to Macquarie University, Macquarie University Hospital, Macquarie Centre and the Sydney Metro, infrastructure that supports both strong rental demand and a convenient lifestyle for residents.

The apartments feature full-height glazing, timber flooring throughout living areas, stone kitchen benchtops, SMEG appliances, floor-to-ceiling bathroom tiling and ducted air conditioning.

Residents will have access to a rooftop recreation level featuring a swimming pool, sauna, barbecue facilities and landscaped relaxation areas, complemented by additional communal space at ground level. Many apartments enjoy uninterrupted views across Lane Cove National Park, reinforcing the project's connection to its natural setting.

[smartcode_project:default project_id=134951 project_image_fid=364551]

<a href="https://www.apartments.com.au/developers/urban-property-group">Urban Property Group</a>, a family-owned developer and builder with nearly four decades of experience, holds a 4.5-star iCIRT rating and was Australia's first developer to introduce 10-Year Latent Defects Insurance (LDI). La Vera is the first apartment development in <a href="https://www.apartments.com.au/developments/macquarie-park-nsw-2113">Macquarie Park</a> approved to offer the additional insurance protection, alongside a five-year warranty on SMEG appliances.

Urban Property Group CEO Patrick Elias said the additional protection reflects changing buyer expectations in the off the plan market.

"Consumers are a lot more weary and a lot more concerned in buying off the plan than they ever have been. Having LDI is a tool to portray the confidence that we have in our product, and a confidence we want buyers to share," Elias said.

Following completion of the building later this year, buyers will move into their apartments well before Christmas.

[smartcode_project_cta:default project_id=134951]

La Vera closes in on completion as Macquarie Park continues residential transformation

Brisbane developer Red &amp; Co's decision to include dual key apartments in its debut Gold Coast apartment development, <a href="https://www.apartments.com.au/new-apartments/como-varsity-lakes-22-lake-street-varsity-lakes-qld-4227">COMO Varsity Lakes</a>, is proving to be one of the project's biggest drawcards, with buyers quickly snapping up the flexible residences.

More than half of the project's 36 dual key apartments have already sold, helping drive COMO beyond the 50 per cent sold mark within the first month of launch.

The strong response highlights growing demand for apartment designs that can adapt to changing lifestyles, with buyers increasingly looking for homes that accommodate multi-generational living, provide rental income opportunities or simply offer greater flexibility over time.

Located on the shores of Lake Orr, COMO will deliver 156 apartments across 16 levels, with the dual-key residences forming a limited release within the broader development.

Each combines a primary two-bedroom apartment with a fully self-contained studio on a single title, connected by a shared foyer and lockable internal door. The design allows owners to house ageing parents, adult children or guests while maintaining privacy, or lease the secondary residence to generate additional income.

Just 17 of the original 36 dual key apartments remain available.

[smartcode_project:default project_id=135546 project_image_fid=367096]

The innovative configuration combines two fully self-contained residences on a single title, typically comprising a primary two-bedroom apartment alongside a separate studio residence, connected via a shared foyer and lockable internal door.&nbsp;

The model is proving particularly attractive to owner occupiers navigating changing family dynamics and the realities of the current housing crisis.&nbsp;

[smartcode_project:default project_id=135546 project_image_fid=363511]

<a href="https://www.apartments.com.au/project-marketer/npa">NPA</a>&nbsp;CEO Andrew Erwin said dual key living was resonating strongly with modern buyers because it delivered both financial flexibility and practical lifestyle benefits.&nbsp;

“The housing crisis and rising cost of living are fundamentally changing how Australians think about home ownership,” Erwin said.&nbsp;

“Dual key apartments provide a genuine solution for families who want to stay connected while maintaining independence. Parents can help adult children save for a future home, ageing parents can remain nearby without moving into aged care, and owners still retain privacy and flexibility.

“Importantly, buyers are also recognising the financial advantages. It creates the opportunity to generate additional income from part of the home without the holding costs associated with owning a separate investment property.”&nbsp;

[smartcode_project:default project_id=135546 project_image_fid=363509]

Unlike traditional dual occupancy arrangements, the residences operate under a single title, meaning owners only incur one set of body corporate fees, council rates and holding costs.&nbsp;

The secondary residence can also evolve over time - functioning as guest accommodation, a home office, creative studio or private retreat before later becoming an income-producing asset.

<a href="https://www.apartments.com.au/developers/red-co">Red &amp; Co</a>&nbsp;Director and Co-Founder David Laverty said the strong early sales reflected growing buyer urgency and changing priorities within the market.&nbsp;

“Securing more than half of COMO’s residences within such a short timeframe is an outstanding result and a clear endorsement of both the design and location,” Laverty said.&nbsp;

“Buyers are responding to the combination of location, connectivity and amenity, but ultimately it’s value relative to other East Coast markets that is driving enquiry.”&nbsp;

“We’re also seeing strong interest from owner occupiers looking for homes that can adapt with them over time. Flexibility has become one of the most important considerations for buyers in today’s market.”&nbsp;

[smartcode_project:default project_id=135546 project_image_fid=363515]

Designed by <a href="https://www.apartments.com.au/architects/bda-architecture">BDA Architecture</a>, COMO features a mix of one-, two- and three-bedroom residences with 2.7-metre ceilings and larger-format floorplans aimed at owner occupiers, downsizers and lifestyle-focused buyers.&nbsp;

The development will feature an extensive rooftop recreation and wellness offering including a 25-metre lap pool, sundeck, barbecue and dining areas, gym, sauna, plunge baths, landscaped gardens, wellness spaces and rooftop pickleball and paddleball courts.

The remaining dual key apartments range from 137 sqm to 167 sqm and include generous three-bedroom layouts with separate self-contained studio accommodation and dual parking.&nbsp;

Erwin said the dual key concept represented a broader shift in how Australians would live in the future.

“People want homes that can evolve with their lives,” he said.&nbsp;

“A dual key apartment can suit a family today, support an ageing parent tomorrow, and potentially generate income later on. That adaptability is becoming incredibly valuable in the current environment.”

Prices currently range from $2,115,750 to $2,583,000.&nbsp;

[smartcode_project_cta:default project_id=135546]

Inter-generational living drives demand for COMO’s dual key apartments as housing pressures reshape buyer priorities 

Builder-developer&nbsp;<a href="https://www.apartments.com.au/developers/ceerose">Ceerose</a> has doubled down on its Leichhardt ambitions, lodging its second State Significant Development Application (SSDA) in the suburb in the last six months.

Their newest proposal seeks to transform a former industrial precinct into a new residential community centred around the adaptive reuse of one of the site's heritage warehouse buildings.

The new project, on a 6,930 sqm block at&nbsp;<a href="https://www.apartments.com.au/new-apartments/40-76-william-street-leichhardt-nsw-2040">40–76 William Street</a>, will bring more than 200 apartments to a suburb that has seen little to no new supply in recent years. It follows Ceerose's late 2025 SSDA for a mixed-use apartment project on nearby Parramatta Road, signalling the developer's growing investment in Sydney's Inner West.

Ceerose Founder Edward Doueihi told Apartments.com.au the developer’s long-standing presence in Leichhardt and the Inner West had given it a strong understanding of how the area has evolved and where its future opportunities lie.

“Ceerose has had a long-standing presence in Leichhardt and the Inner West, giving us a unique understanding of the area’s evolution and future potential,” Doueihi said.

“Having delivered projects throughout the region, we have witnessed the suburb’s transformation first-hand and understand the opportunities for its continued growth.”

Doueihi said that understanding also informed the planning process, with a comprehensive Stakeholder Engagement Outcomes Report prepared before the application was lodged.

The report identified the key issues and concerns raised by neighbouring residents and other stakeholders, allowing those matters to be considered and incorporated into the design where appropriate.

He said the delivery of additional housing would also play an important role in supporting the revitalisation of Norton Street and the Italian Forum.

“By increasing the local residential population, the development is expected to strengthen demand for local businesses, encourage further investment, and help restore the vibrancy that made the precinct a thriving destination in the early 2000s.”

<img alt="First look: Ceerose returns to Leichhardt with 203-apartment adaptive reuse proposal at former warehouse site" data-entity-type="file" data-entity-uuid="7258c54c-8167-479e-8361-2d5fca9915b4" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Appendix%2010B%20-%20CGI%20-%20View%202.jpg?VersionId=S9DQfxu_jpcB5LrAEYFUbyMzg5odW6i5" />

Designed by <a href="https://www.apartments.com.au/architects/woods-bagot">Woods Bagot</a>, the redevelopment would involve the demolition of four existing industrial buildings while retaining and adaptively reusing the site's most significant warehouse. The retained structure would anchor a new residential precinct comprising five interconnected buildings arranged around a large central landscaped courtyard, with heights stepping from five storeys along the surrounding residential streets to 11 storeys at the William Street corner.

According to the Architecture Design Report by Woods Bagot, the proposal "seeks to create a residential village centred around a generous green heart while celebrating the site's industrial heritage through the adaptive reuse of the existing warehouse building."

The development would comprise 203 apartments, with 188 proposed as build-to-sell residences, alongside 15 affordable housing apartments.

Rather than treating the retained warehouse as a standalone heritage object, Woods Bagot has sought to weave the site's industrial history throughout the masterplan. The proposal retains the north and west facades of the landmark corner warehouse, while new buildings reinterpret the site's brick-and-steel industrial language through their material palette and architectural expression.

<img alt="First look: Ceerose returns to Leichhardt with 203-apartment adaptive reuse proposal at former warehouse site" data-entity-type="file" data-entity-uuid="9e8c64c2-881b-49e1-8c90-6b6acaaa45b6" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Appendix%2010C%20-%20CGI%20-%20View%203.jpg?VersionId=Qm8_8H_Xrg_sc4Mdjc59vlAcKF_5wRTb" />

The design is organised around what Woods Bagot describes as a "green heart", a landscaped communal open space that reinstates the leafy character removed when the site became an industrial storage facility. A new pedestrian laneway running through the site would improve permeability between William, North and Francis streets, linking residents through landscaped public spaces while activating the ground plane.

Residents would have access to communal gardens and shared recreation areas distributed throughout the development. Sustainability has also been prioritised, with the project targeting an average 7.9-star NatHERS rating. Proposed initiatives include rooftop solar generation, rainwater harvesting, passive solar design, naturally ventilated lobbies, extensive cross-ventilation and the reuse of existing building fabric to reduce embodied carbon.

The adaptive reuse strategy became a defining feature of the application after heritage investigations found only one of the site's industrial buildings could feasibly be retained. The Heritage Impact Statement concludes that preserving the key warehouse façades while referencing the site's industrial character throughout the new development provides an appropriate balance between renewal and conservation.

<img alt="First look: Ceerose returns to Leichhardt with 203-apartment adaptive reuse proposal at former warehouse site" data-entity-type="file" data-entity-uuid="efffafdb-594f-4e2b-a067-921fd51c05e1" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Appendix%2010D%20-%20CGI%20-%20View%204.jpg?VersionId=DPmE4.k16YRt0i27hEZVtJAffarpvUfx" />

"Retention and adaptation of the site buildings has been explored but found not to be feasible except for the tallest building, whose street facades will be retained," the heritage report states.

"The proposed building will interpret the brick and steel character of the subject site, including reuse of some components and construction of a large 'sawtooth' structure in the proposed open space."

<img alt="First look: Ceerose returns to Leichhardt with 203-apartment adaptive reuse proposal at former warehouse site" data-entity-type="file" data-entity-uuid="3bfef2b5-83f5-40cd-9cab-767092f34266" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Appendix%2010E%20-%20CGI%20-%20View%205.jpg?VersionId=7asb3i_ql4ybbuJOUb5UHBEIy0Q9t.DF" />

The William Street site is located around 300 metres from Leichhardt North Light Rail station and a short walk to Norton Street's retail, dining and hospitality precinct. The surrounding area has increasingly become a focus for urban renewal given its proximity to public transport and the Parramatta Road corridor.

Doueihi founded Ceerose in 1998 and has grown the business to become one of Sydney's more active apartment developers in recent years, with completed projects including The Alex Collective in Alexandria, Abbie's Lane in Annandale, and the award-winning Munro House in Elizabeth Bay. They are currently delivering Belgravia, 17 luxury apartments in Potts Point.

First look: Ceerose doubles down in Leichhardt with adaptive reuse of former warehouse site

Policy

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Allowing young buyers to withdraw their superannuation savings to buy their first home would trigger a $31 billion federal budget hole by mid-century, according to indicative modelling by PwC.
Changing super rules to fund housing would cost the government between $500 million and $1.1 billion a year in lost revenue.
Treasurer Joe Hockey has triggered debate since last weekend's reported comments about making super more "flexible" in the wake of the intergenerational report.
The analysis by PwC was provided to The Australian Financial Review based loosely on a similar scheme in Canada, which allows a withdrawal of $25,000 for a first home.
PwC partner Paul Abbey said he assumed that an Australian scheme would be limited to people below 35 years, with around half of those eligible choosing to withdraw $25,000 for a 10-year period.
The loss to government – which taxes earnings on super balances at 15% – would be $1.1 billion in 2016-17, and fluctuate between $611 million and $993 million over the next nine years.
By 2049-50, the figure would hit $2.1 billion, taking the accumulated hit to government to $31 billion, according to the PwC estimate.
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jchancellor-FAypfDUnLy

FHB super access would blow hole in federal budget

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You don’t become a fully fledged member of Australian society without first owning a property. And the more properties you own, the more Australian you become. Take this far enough and eventually even The Block becomes compelling viewing.
We know this to be true because the tax system, like reality TV, is a mirror to our national aspirations. Both tell us that property investment is good and rising house prices even better.
Australians do not pay capital gains tax on the family home and investors can negatively gear their property investments. Own 30 properties? Please, claim a tax deduction on all of them. Want to cut your capital gains tax bill in half? Sure, just hold the asset for more than 12 months.
As the effects of these policies took hold and prices rose, first-home owners were squeezed out. This wasn’t politically acceptable and anyway, who was going to hold up the ladder if not those on the bottom rung?
The solution was to throw money at them, too. In Tasmania, home to some of the cheapest housing in the country, the state Labor government recently<a href="https://www.themercury.com.au/lifestyle/new-home-grants/story-fnj64ocs-1226754568608" target="_blank"> increased the first-home buyer’s grant to an incredible $30,000</a>. Self-managed super funds were also recently encouraged to leverage into the boom.
Now Treasurer Joe Hockey has turned the idiocy up to 11 by suggesting those struggling to get on the property ladder should also be allowed the chance to blow up their super funds by speculating on higher house prices. Well, if super funds can do it, why not everyone else?
There is bipartisan stupidity on housing market affordability policies. Politicians of both major parties love the idea of throwing huge sums of money to make the problem worse. They want to make housing more affordable, but only if they can do so by pushing prices up.
There is simply no evidence to suggest first-home owner grants make property more affordable. There is plenty of evidence to suggest they make them more expensive.
As Bank of America chief economist Saul Eslake told a Senate committee in 2014: "It's hard to think of any government policy that has been pursued for so long, in the face of such incontrovertible evidence that it doesn't work, than the policy of giving cash to first-home buyers in the belief that doing so will promote home ownership."
But instead of ending the stupidity, like so many treasurers before him Joe Hockey is intent on finding another way to perpetuate it.
The effect of these policies is three-fold. First, property prices have well beyond the rate of inflation and wage growth (see <a href="https://www.afr.com/p/national/australia_housing_boom_in_five_graphs_OEp5Bttj0dyWeE9zAEXxjM" target="_blank">Australia’s housing boom in five graphs</a>). Second, despite taxpayers spending billions on first home-owner grants since 1964, the share of first-home buyers as a percentage of the total market has never been smaller. In November last year, they represented just 12.3% of the market.
Finally, owning property is becoming something only the rich can afford. Eslake suggests that <a href="https://www.ahuri.edu.au/downloads/media/The_Australian_-_Locked_out.pdf" target="_blank">the top 20% of income earners own 36%</a> of the housing stock.
There are many things politicians could do to make housing more affordable, not least of which would be to eliminate negative gearing. That would remove some of the demand for housing. Making it easier and cheaper to build through greater land releases and quicker and cheaper development approvals would increase supply. The combined effect would be lower property prices.
But that isn’t something any politician wants to countenance, let along bring about through sensible, well-reasoned policy.
Until we get a courageous politician that is willing to do that, the bipartisan but expensive charade -- that housing can be made more affordable with policies that push prices up -- will continue.
John Addis is the founder of Intelligent Investor Share Advisor and director of Private Media, publishers of Property Observer. Unlock all of Share Advisor’s stock research and buy recommendations<a href="https://landing.intelligentinvestor.com.au/crikey-article?utm_source=crikey&amp;utm_medium=article&amp;utm_campaign=crikey_articles" target="_blank"> by taking out a 15-day free membership</a>.
This article first appeared on <a href="https://www.crikey.com.au/" target="_blank">Crikey</a>.
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po-LsXgBTHBmX

The expensive illusion of housing affordability policy: John Addis

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Paul Keating, the architect of Australia's universal superannuation scheme, has said it was a bad idea to allow first home buyers to dip into their super savings.
"Any meaningful housing deposit taken from the accumulated savings of younger savers would effectively eliminate or near eliminate the base from which the important compounding [of earnings] would otherwise occur," Keating wrote in a column for Fairfax Media.
The former prime minister Paul Keating also warned that if Australians could dip into their super savings at an early age, it would increase pressure on the federal government's aged care budget.
"The key to wealth accumulation in retirement savings is compound earnings," Keating noted days after the Treasurer Joe Hockey raised the prospect of allowing people to dip into their super.
Joe Hockey called for public debate on making super more "flexible" during people's lives.
In an opinion piece, Paul Keating accuses the Liberal Party of attacking Australia's super system for ideological reasons.
"The Liberals have always hated national superannuation for the broad workforce," Keating writes.
"Superannuation for them is fundamentally an ideological matter.
"Just like Medicare, the Liberals object to the universality of Medicare and they keep having a go at it, like the recent attempt to require a co-payment to doctors.
"They have now dropped off that because the going got too rough for them.
"So that having failed, they are back at it again at super – the other great universal scheme.
"But instead of saying they oppose it ideologically, and arguing their case intellectually, the Treasurer will try to reach the same outcome by masking his real intentions as a professed concern for homebuyers." 
"This idea is certainly not an innovation and is not responsible enough even to be considered a thought bubble."
He wrote that proposals floated by the Treasurer would breach the principle of "preservation" of superannuation accumulations and would destroy universal retirement savings at its core.
"Breaking what is now a national consensus on the principle of preservation, where savings cannot be drawn down till age 55, would amount to the wilful destruction of one of the best retirement systems in the world."
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Paul Keating says Joe Hockey's FHB super idea will compound ageing problems

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While accountants PwC brush up on Point Piper foreign buyer laws, the Federal Treasurer Joe Hockey says further suspicious house purchases across Australia were to be investigated by the reinvigorated Foreign Investment Review Board (FIRB).
It follows the government decision to <a href="/news/point-pipers-villa-del-mare-back-for-sale-as-australian-treasurer-thwarts-chinese-billionaire">force the sale of the $39 million Point Piper trophy home, Villa de Mare</a> (pictured above).
"It's amazing how many phone calls we got this morning," a chuffed Joe Hockey said yesterday, ignoring the backlash from some business interests which sees far wider ramifications for Chinese trade relations.
"We're not going on a witch hunt," the Treasurer added.
"And we definitely don't want an atmosphere of xenophobia or anything.
"We actually just want to be in a position where we maintain, preserve and enhance the integrity of the foreign investment regime."
The Sydney-based, but beneficially China-owned, company Golden Fast Foods has 90 days to offload 63-67 Wolseley Road, Point Piper after being found to have breached foreign investment rules.
The company was deemed ultimately beneficially controlled by Chinese developer Evergrande Real Estate Group and China's 15th richest man, according to Forbes, Xu Jiayin.
Golden Fast Foods is directed by Sydney-based accountant and former PwC partner Stanley Brogan and two Chinese associates, including the Evergrande director Huang Xiangui, <a href="/news/guangzhou-evergrandes-chinese-billionaire-owner-xu-jiayin-tipped-as-villa-del-mare-point-piper-buyer">as Property Observer noted on its November 2014 settlement</a>.
The federal goverrnment forced sale comes as Xu shortly attends, as a delegate, China's annual parliamentary meeting, the main public event on China's political calendar.
Searches on Baidu, a Chinese version of Google, brought up the matter of Xu's Point Piper mansion, though with an error page saying "the news content was unable to be provided".
Earlier critical coments by internet users had appeared on the Weibo website, according to The Australian's China correspondent, Scott Murdoch.
Hockey would give no details of the other houses under suspicion but advised they were across price ranges.
The Australian Financial Review reported Joe Hockey had indicated he had no sympathy for the owner of the home and the FIRB investigation had been requested personally.
The sale of Villa del Mare is FIRB's first forced divestment since 2006 coincided with the unveiling of a federal government consultation paper.
The proposed measures are designed to restore confidence in a foreign investment review system that had not prosecuted anyone for breaching the rules in nine years.
"We welcome foreign investment. It is hugely important," Hockey said.
But Sydney's top end of town fears the fallout will be much wider than a prestige property upheaval, arguing it was easy for the Chinese government to tacitly advise banks that there were not to be acquisitions of Australian businesses for a while.
Geoff Raby, Australia's former ambassador to Beijing, recently noted Chinese interest in Australian farms and processing assets was surging.
Since 1 March, foreign investors require approval from the FIRB to buy agricultural land worth $15 million, down from the previous threshold of $252 million.
Raby, who was the Chinese ambassador from 2007-2011 and has since founded Beijing-based advisory Geoff Raby &amp; Associates, said the changes had been noticed in China.
"The Chinese certainly wonder what our intention is and ask: Is this directed against China? Is this a Chinese concern we have? Any change in the [regulatory] regime will create uncertainty," he told The Australian Financial Review following his presentation to the ABARES Outlook 2015 conference in Canberra.
The Australian reported PwC had no role during the purchase of the Point Piper property as PwC merely helped Mr Xu establish the shelf company that later bought the property. 
The firm was also called in for advice after questions arose about why approval for the transaction had not been sought by the FIRB, The Australian advised.
 
 
 
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Foreign buyer crackdown is no witch hunt says Joe Hockey after Point Piper FIRB divestiture order

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GUEST OBSERVATION
The Abbott government’s lurch at a foreign investment fee to fund the Foreign Investment Review Board (FIRB) will be a minor inconvenience. 
“There is significant global evidence from recent times including Canada, Singapore and Hong Kong where these types of taxes on foreign investment have been totally counterproductive, caused significant corrections within the markets and harmed the construction industry” CBRE residential projects chairman Justin Brown was quoeted as saying in the <a href="https://www.afr.com/p/national/politics/foreign_property_buyers_to_pay_approval_TnnDgOvoNycdqw7V5urAAN" target="_blank">AFR</a>.
The response from the real estate sector has been typical. 
Whilst we are supportive of some traction towards the taxation of excessive real estate profits, the 1% charge will mean little in comparison to last year's capital gains.
As outlined in <a href="https://www.prosper.org.au/2015/02/24/the-foreign-investment-future/" target="_blank">the foreign investment future</a>, the average $3,375,000 FIRB approved investments last year would pay a foreign investment fee of $33,750. The capital gains were running at $229,500. Such a fee will not break the bank.
In that same post I mentioned how effective Singapore’s foreign investment fee of 18% was in maintaining the public interest – low land prices. The property lobby have convinced the news cycle that rising property prices are a good thing. They are if you are a property seller or a bank. For the public this means rising debts and thus interest payments.
We do however see merit in the commentary of Ray White chairman Brian White in comparing such a charge as a stamp-duty like charge. Such a foreign investment fee will curb some demand, impeding turnover.
However, it is likely to be minor as the above capital gains to foreign investment fee comparison demonstrates. Treasurer Hockey was adamant the fee was purely an administrative one so that the FIRB could do its job.
Only $200 million is needed yearly to fund an expanded FIRB. <a href="https://www.firb.gov.au/content/default.asp" target="_blank">Will we get a new website for that?</a> The relative size of such fundraising is again minor to the <a href="https://www.propertyobserver.com.au/https://www.abs.gov.au/ausstats/abs@.nsf/mf/6416.0" target="_blank">$418 billion in land price increases in the 13-14 year.</a>
After a minor skirmish, we expect this will have little imposition on the global land bubble. The fact it is set at a much lower rate than Hong Kong and Singapore ensures global investors will still be set upon buying up locations of inspiring natural beauty.
If the government knew what they were doing, a Federal Land Value Tax would be reimposed nearly <a href="https://en.wikipedia.org/wiki/Australian_Taxation_Office#History" target="_blank">100 years since our first federal tax was announced</a>. Accompanying this would be a significant 5-10% income tax deduction and a doubling of the pension. The LVT would curb speculative foreign investment, reigniting the Australian creative spirit alongside lower land prices and a lower tax burden for all.
Karl Fiztgerald is project director of <a href="https://www.prosper.org.au/" target="_blank">Prosper Australia</a>.
This article first appeared on Prosper's website.
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KarlFitzgerald-5HzVbxHhJb

Foreign investment fee will only be a minor inconvenience: Karl Fitzgerald

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GUEST OBSERVATION 
If the media is to be believed, the reason the real estate market is so hot is due to foreigners, especially Chinese, turning up with blank cheques buying everything in sight.
Apparently Australians are no longer able to get a foothold in the housing market because the playing field is not level. How much of this is true and how much of this is sensationalism and headline grabbing? Let’s explore the facts as they currently stand.
WHO CAN BUY WHAT?
<table style="width: 460px;" border="1" cellspacing="0" cellpadding="0"><tbody>
<tr>
<td>
Australian citizens and permanent residents
</td>
<td>
Can buy any property, new or second hand.
There are no limitations of any kind.
</td>
</tr>
<tr>
<td>
Temporary resident
</td>
<td>
A temporary resident (such as those on student visas of more than 12 months or those who have applied for permanent residency and are on a bridging visa) may acquire one established dwelling only and it must be used as their residence (home) in Australia.
There is a condition which stipulates that the temporary resident must sell the property when it ceases to be their residence.
Temporary residents are not permitted to buy established dwellings as investment properties.
Temporary residents may buy new dwellings, or vacant land to build new dwellings, because these latter purchases increase the available housing stock in Australia.
Temporary residents need to apply to the Foreign Investment Review Board (FIRB) to buy in Australia.
</td>
</tr>
<tr>
<td>
Foreigners / short-term visa holders
</td>
<td>
Only allowed to purchase brand new, off the plan properties, or vacant land for immediate development. 
Foreign residents cannot buy established or second-hand dwellings as investment properties or to live in. 
Foreign residents need to apply to the FIRB to buy in Australia. Such proposals are normally approved without conditions.
</td>
</tr>
</tbody></table>
ARE CHINESE BUYERS REALLY DOMINATING?
There is no doubt that many people of Asian heritage are seen each week at open inspections and auctions everywhere in Sydney. It is easy to jump to the assumption that anyone looking remotely East Asian must be a ‘rich Chinese’.
The reality is that Asian buyers are easy to spot because they look different in a crowd of Caucasians. Nobody really spots the Kiwi or the Brit – but Asians do stand out in physical appearance. However, it is often the case that people of Asian appearance may be second, third or even fourth generation Australians. 
Even if they are newly arrived immigrants who do not speak English, they are as entitled as any other Australian citizens or long-terms resident to buy a property. In addition, many people have difficulty identifying the different Asian backgrounds and lump Koreans, Japanese, Singaporeans, Malaysians, Vietnamese, Thai, Indonesians, etc. all as ‘Chinese’.
Having said this, there has definitely been a significant increase of buyers from mainland China. Many factors have contributed to this rise: cheap Australian dollar, increasing middle class, fear of future instability in China and therefore the need to invest the money offshore, seeking a safe haven for the family by having children educated in Australia, etc. For many mainland Chinese buyers, buying a property is much more than just about having a roof over their head. It is about an insurance policy – and something they are willing to pay a premium for.
SO WHAT IS THE PROBLEM?
The main issue is the lack of tracking system to ensure the rules as outlined above are being adhered to. There have been many claims of foreigners breaching the rules of investment. However, last year's parliamentary inquiry heard that the FIRB had not prosecuted a single case since 2006, rendering it essentially ineffective.
WHAT DOES THE GOVERNMENT PROPOSE TO DO?
Yesterday, <a href="/expert-insights/investing/10-000-firb-fee-to-buy-1-million-plus-home-tony-abbott-policy-unveiled">the Treasury released a proposal </a>on “Strengthening Australia’s Foreign Investment Framework”. It is a discussion paper which is open for public comments until the 20 March 2015.
This discussion paper forms the basis of the government’s consultation on reforms to the foreign investment framework. The proposed reforms include:
<ul>
<li>increasing compliance and enforcement activities around foreign investment in residential real estate through the creation of a specialised investigative and enforcement area within the Australian Taxation Office; and</li>
<li>introducing new civil penalties and increased criminal penalties for foreign investors and third parties who breach the foreign investment rules.</li>
</ul>
The government is looking at setting up a new register of foreign investors in both residential and agricultural real estate, with fines of up to 25% of the value of the property for any breaches.
Consideration is also being given to the introduction of an application fee on all foreign investment proposals – this is expected to raise $200 million a year. This is not to act as a deterrent to foreign investment, but to fund the costs of better data collection, screening, compliance and enforcement activities. A more sophisticated data matching systems drawing information from various government agencies such as the Treasury, Tax Office and Immigration is desperately needed and needs to be funded.
For residential real estate and rural land acquisitions, the proposal is for a fee of up to $5,000 that would apply to properties valued under $1 million. Applications to purchase a property equal to or greater than $1 million would be subject to a fee of up to $10,000. This would then increase in increments of up to $10,000 for each additional $1 million in property value. (e.g. For a property up to $2 million, the fee payable would be $20,000. For a property up to $3 million, the fee payable would be $30,000, etc.)
The proposed fees are much higher than the $1,500 recommended by last year's parliamentary inquiry into foreign investment.
IS THIS GOING TO WORK?
Foreigners who have the discretionary funds to purchase a property in Australia will probably not even blink at needing to pay this extra fee. So this is certainly a good fundraising opportunity for the government. For the majority of our foreign buyers, they are purchasing in cash. So a fee of $5,000 or even $30,000 for that matter is really small change for them. We anticipate this will have near zero deterrent effect – but then again, the government has stated that this is not intended to be a deterrent but a fundraising activity.
However, in addition to better enforcement of the current FIRB restrictions, there needs to be a more rigorous review of the current stamp duty structure. A very good model to learn from is the tiered stamp duty that Singapore recently phased in. To kerb overwhelming foreign interest in Singaporean residential properties which skyrocketed prices, the government introduced differing levels of stamp duty payable by citizens, permanent residents and foreigners. What is particularly interesting about the Singapore model is that they also charge additional stamp duty for those who own more than one to two residential properties. There is also special stamp duty on properties sold within three years: 10 to 20% of purchase price, depending on when sold. This was intended to prevent speculative buying.
So while the proposed enforcement reforms are certainly much needed, the separate question which needs to be asked is whether the current rules and tax structure are effective enough to begin with?
<a href="https://www.propertyobserver.com.au/https://plus.google.com/110172465327488162875?rel=author" target="_blank">Shane Oliver</a> is head of investment strategy and economics and chief economist at <a href="https://www.ampcapital.com.au/home" target="_blank">AMP Capital</a> and is responsible for AMP Capital's diversified investment funds. 
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soliver-smf6LQXgW9

New fees are small change for FIRB buyers: Shane Oliver

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In the wake of yesterday's federal government announcement, industry figures are jumping in to give their thoughts on the proposed new laws.
Veronica Morgan of the Real Estate Buyers’ Association of Australia said her organisation supported better enforcement and widening of penalties for foreigners who failed to comply with local laws.
“It’s a hot market for loads of reasons but you can’t blame the Chinese,” Morgan told The New Daily.
There were concerns about foreign developers buying Australian land, building apartment blocks and then marketing those properties to overseas buyers with little oversight by local authorities, she acknowledged.
But she said it would be foolish to conclude the Chinese buyers were responsible for soaring pricess across the residential property market.
“It’s a hot market for loads of reasons but you can’t blame the Chinese,” Morgan said.
“It does appear that this debate appeals to some latent racism that exists in Australia.
“At the bottom of it all is fear and the reporting of it in the media needs to improve.”
The buyer's agent and managing director of Propertyology Simon Pressley said a tax of sorts on foreign property buyers had long been on the cards.
"There is absolutely no doubt that increased foreign buyer activity in Sydney and Melbourne have contributed to price growth", said Simon Pressley. "Developers already fork out rebates in the order of $40,000 for third parties to spruik properties worth $500,000.
"Absorbing a $5,000 fee to a foreign buyer on an $800,000 apartment or a $10,000 fee on a property worth $1 million plus isn't a drop in the ocean to them." "The principle of the fee proposal is sound and has likely come about with some influence from the RBA.
"But if legislators are seriously trying to cool Sydney's market they'd need to add another zero to the fee," Pressley said.
Ray White Real Estate chairman Brian White told Fairfax Media the proposed fees had the potential to "shock the market".
"And no market appreciates or responds well to shocks. It has connotations back to the aborted vendors tax proposed by the NSW Treasurer Michael Egan that needed to be abandoned due to market response," he recalled.
CBRE residential projects chairman Justin Brown told Fairfax Media the new taxes were counterproductive and ill-thought through.
"There is significant global evidence from recent times including Canada, Singapore and Hong Kong where these types of taxes on foreign investment have been totally counterproductive, caused significant corrections within the markets and harmed the construction industry," Brown said.
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Don't blame the Chinese for soaring house prices: Buyer's agent Veronica Morgan

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The Prime Minister’s clampdown on foreign investors in Australian real estate has been revealed as little more than a revenue raising exercise.
After all the posturing, this is what it comes down to: a cash grab. Politicians doing to real estate what they always do to real estate: using it as a cash cow.
Overseas buyers will be charged hefty fees for the privilege of buying Australian real estate and Australian developers will be charged the same hefty fees for the right to sell to them.
Otherwise nothing will change in the national property landscape. Not a single sale price will be reduced or not one first home buyer will be better off.
As well as a cash grab, the Tony Abbott move on foreign investment is also a push for popularity by appearing to be doing something for the ordinary bloke. But the thinking is so fuzzy and the policy delivery so confused that it won’t achieve even that shallow objective.
I listened to Abbott announcing and justifying the proposed policy and it was clear he had not sorted out his thinking. The arguments simply didn’t stack up.
He was still trying to infer that somehow this will help battlers achieve the 'Great Australian Dream' but couldn’t explain how this policy will achieve that.
He maintained that foreign investment was important to Australia and that foreign buying increased supply and therefore made dwellings more affordable for the ordinary bloke, but couldn’t explain how these new punitive measures would help to achieve that, when they appear set up to discourage and curtail foreign investment.
It’s all rather bizarre.
There are measures to clampdown on developers who focus their marketing overseas without trying to sell their high-rise apartments locally. But foreign investors are the sole reason most of these highrise buildings are being planned. This is particularly true in over-supplied markets like inner city Melbourne and downtown Brisbane.
They’re not designed for local consumption. Without most, if not all, of the units being sold offshore, these projects will not be built.
That will reduce supply, which theoretically places upward pressure on prices. And it will reduce construction activity, which is deemed the economic savior of the nation at a time when resources investment is declining.
The bottom line is that restraining foreign investment won’t make Australian dwellings more affordable. It will do nothing to change the situation for first time buyers.
Foreign investors are a very small component of the Australian buying market. Their activity is primarily focused on Top End properties in the prestige suburbs of Sydney and Melbourne, and on highrise apartments in the inner city areas of our major cities.
They are not competing with local first time buyers. Restricting foreign buyers won’t change the price on a single house anywhere in Australia. It won’t stop people of Asian appearance (dubbed foreign buyers by disgruntled under-bidders) from winning bidding wars at Sydney and Melbourne auctions of prestige property.
It’s a Yes Minister scenario, designed by Sir Humphrey Appleby and delivered by a befuddled Jim Hacker, who somehow got the pages of the script mixed up - again.
TERRY RYDER is the founder of <a href="https://hotspotting.com.au/" target="_blank">hotspotting.com.au</a>. You can <a href="https://mailto:ryder@hotspotting.com.au" target="_blank">email him</a> or follow him on <a href="https://www.twitter.com/hotspotting" target="_blank">Twitter</a>.
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terryryder-YECXbqmri2

Abbott's foreign investor cash grab built on bizarre logic: Terry Ryder

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There's a little-known government reverse mortgage scheme, the pension loan scheme (PLS), which will necessarily become part of Minister for Social Services Scott Morrison's solution to the pension assets test conundrum.
Most people may not be aware that the scheme exists and although the PLS is listed <a href="https://www.humanservices.gov.au/customer/services/centrelink/pension-loans-scheme" target="_blank">on the Centrelink website</a>, it does not appear prominently. 
My barber told me about it. 
The issue has arisen given the proposal that family homes should be included in the assets test, raised last year in the Abbott government’s National Commission of Audit and <a href="/expert-insights/investing/scott-morrison-re-considering-family-home-inclusion-in-pension-assets-test">a hot topic last wee</a>k. 
Morrison suggested he would be addressing the rules that deter the elderly from selling the family home and then downsizing to a smaller, cheaper properties, while allowing pensioners to retain some cash without reducing their entitlements.
However the government scheme is currently only available to better-off retirees exchanging equity in their homes for a loan that is repaid from the proceeds when the home is eventually sold, the interest on the loan being capitalised.
The Centrelink and Department of Veterans' Affairs scheme is restricted to those on a part age pension, who own their own home or investment property.
The loan has to be taken as an income stream and is limited to that which, when added to the part-pension, takes them to the maximum pension.
The interest rate is 5.25% and fixed, which is much lower than the variable interest rates charged by reverse mortgage providers in the wider marketplace.
But oddly retirees who are poor enough to be on the full age pension and who own their own homes are currently unable to boost their income through the government scheme.
Self-funded retirees who own property can access the scheme if they are ineligible for the age pension under either the income test or the assets test, but if they are ineligible for the age pension under both tests, they cannot access the scheme.
The Australia Institute says the scheme<a href="https://www.tai.org.au/content/can-you-eat-family-home" target="_blank"></a> is available to retirees who need it the least and says the scheme should be made available to everyone of pension age.
"This may seem consistent with the broad goals of means testing," the institute suggested in the 2014 report, <a href="https://www.tai.org.au/content/boosting-retirement-incomes-easy-way-0" target="_blank">Boosting retirement incomes the easy way - Extending the Pension Loan Scheme to all retirees</a>.
"Those with both high income and high value assessable assets cannot use the PLS.
"But it also has consequences that seem perverse. A retiree with income just under the threshold and very high value assets can use the PLS, as can a retiree with very high income but assessable assets just under the threshold.
"But a single retiree with just over $202,000 in assessable assets and just over $160 private income a fortnight cannot access the scheme, as their pension is reduced under both tests."  
On the Australia Institute's numbers complied by researchers, Richard Denniss and Tom Swann, the scheme could be expanded without significant cost to the budget. 
"A simple modification to the PLS that would, in making it fairer, significantly help to boost the retirement incomes of a large number of current retirees," the report said. 
The Australian government will spend around $36 billion in 2014-15 on tax concessions for superannuation, the stated purpose of which is to increase retirement incomes.
The PLS has been in place in some form since at least 1986, and the interest rate has since been adjusted.
The researchers noted it was unlikely that governments and policymakers would have let a costly but regressively targeted loans scheme remain in place without it attracting attention – especially given current concern about budget deficits.
They then noted that the PLS is not mentioned in the 2012-13 Department of Human Services Annual Report and the Australian Instutute could not find mentions in previous annual reports.
Nonetheless, it is likely the scheme is run at a low cost to the government and could be expanded on a cost-neutral basis, it is suggested.
Indeed, given current concerns about the budget deficit now and down the track, the Abbott Hockey government could readily reform the scheme so that it actually generates revenue.
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Scott Morrison's budget solution rests with revised pension home loan scheme

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GUEST OBSERVATION
With Sydney’s clearance rate hitting 87% on the weekend and a modest three bedroom weatherboard homes selling for $1.36 million, (some 40 minutes commute from the CBD), concerns over the role of speculative investment continue.
The ‘golden ticket’ to fast track residential status, the Significant Investment Visa (SIV), has seen <a href="https://news.domain.com.au/domain/real-estate-news/significant-investor-visa-approvals-increase-fivefold-in-a-year-20150220-13kkzr" target="_blank">a five-fold increase in applications</a> over the last year. This program has attracted$3.2 billion in investments. Direct investments in real estate are not recognised as a qualifying factor.
The federal government has expanded such incentives with the Premium Investment Visa, developed for those willing to make a $15 million investment in non-real estate related investments. We commend the government for recognising further investment in real estate undermines the competitiveness delivered by lower land prices.
However the carefully worded statement by Minister Robb <a href="https://trademinister.gov.au/releases/Pages/2014/ar_mr_141017.aspx" target="_blank">announcing the Premium Investment Visas said</a>:
"Minister for Trade and Investment Andrew Robb said that direct investment in residential real estate would not be a complying investment under the government’s proposed new Premium Investor Visa (PIV)."
Repeat – ‘no direct investment in real estate’. This implies real estate investment trusts (REITs) and other managed investments into real estate are allowed, encouraging both the further centralisation of economic power and additional investments in land. Those in the finance and real estate sectors will be delighted.
The chair of the parliamentary inquiry into foreign investment, Kelly O’Dwyer, said <a href="https://www.kellyodwyer.com.au/housing-supply-affordability-and-investment-address-to-the-committee-for-economic-development-of-australia/" target="_blank">in a speech last week:</a>
"Non resident foreign investors, while they can purchase new dwellings cannot generally purchase existing dwellings.
"Applications to purchase new dwellings are therefore generally granted, while applications to purchase existing homes are only granted if the purchaser is a temporary resident.
"So who is a temporary resident and what are the rules? Temporary residents in Australia, that is those people who have a visa to reside in Australia for over 12 months, are allowed to purchase an existing dwelling as a home but they must divest that home within three months of leaving the country at the expiry of their visa...
"The Committee found that there were loopholes in the current framework – that far from penalising individuals who made illegal purchases, in some instances it rewarded them.
"Let me give you an example. If a non-resident foreign person purchased an existing home this would be contrary to the rules. Just as it would be if that non-resident foreign person purchased multiple existing homes.
"Under the current regime, if FIRB found out and successfully divested that person of those properties – and those properties had appreciated in value from the time of purchase to the time of sale, that non-resident foreign investor would get to keep the windfall gain.
"Clearly this loophole needs to be closed."
Finally a recognition of windfall gains! If the naturally rising value of land is not fit for unlicensed foreign investors, does that mean in time the public will question all windfalls as <a href="https://www.prosper.org.au/georgist-glossary#Unearned%20Income" target="_blank">Unearned Income</a>? If the community creates that value through their development, their existence, shouldn’t they too benefit? O’Dwyer continues:
"All foreign investors in residential real estate must apply for approval from the FIRB prior to purchase.
"According to the most recent FIRB statistics, last financial year, FIRB approved foreign investment into residential property of around $34 billion, double the $17 billion approved during 2012-13.
"Much of this investment is concentrated in the Melbourne and Sydney markets. Approximately 80% of total investment is attributable to new property, which at over $27 billion 2013-14 is 170% higher than 2012-13.
"The total number of established property approvals for 2013-14 is nearly 8,000 as compared to just over 5,000 for 2012-13."
The 8,000 approved foreign investments averaged $3,375,000 – with totals up 170%!
We fear the foreign investment ‘tightening’ further elaborated on in O’Dwyer’s speech will do little to stem the tide of international capital.The capital gain on a $3,375,000 investment at the national average of 6.8% for the last year equated to $229,500 (<a href="https://www.propertyobserver.com.au/https://www.abs.gov.au/ausstats/abs@.nsf/mf/6416.0" target="_blank">ABS 8 Capital Cities</a>). A $1,500 application fee for purchases limited to new stock only, alongside the rigmarole of applying via the Foreign Investment Review Board, will do little when such large amounts are being invested on average.
If the windfall gains for an illegal foreign investor are to be forfeited to the government, then why not all such capital gains? The conflict between sovereignty and savvy investment is mounting in the eyes of <a href="https://www.prosper.org.au/2015/02/19/the-rotting-fruits-of-a-100-year-old-trend/" target="_blank">the speculative onslaught</a>. Foreign investment is a direct challenge to the control of national resources.
Singapore has taken <a href="https://www.smh.com.au/business/a-highendproperty-collapse-in-singapore-20150219-13jkf5#ixzz3ScPhbzcR" target="_blank">a more direct approach</a>.
As progressive as that is, refinement is needed. A <a href="https://www.prosper.org.au/2012/10/02/council-rating-subsidies/" target="_blank">property tax penalises improvements</a> – install solar or renovate and you are penalised under this perverted system. This is not productive. The tax should focus on land values. Rising locational land values are the trigger for property price increases, so that is where the focus need be. The <a href="https://www.iras.gov.sg/irasHome/page04.aspx?id=2094" target="_blank">Singaporean property tax does the opposite, by not including any land value</a>. This will encourage run down properties (accompanied by generous depreciation allowances no doubt).
It must be noted Singapore has also imposed additional measures limiting debts to income ratios.
Despite the property tax shortfalls, Singaporean property prices fell 4% last year, with further falls to come. After a close election with foreign investment a major election issue, we hope the political elite can hold their nerve in the face of the predictable vested interests backlash. Perhaps the recent five year extension of <a href="https://www.bloomberg.com/news/articles/2015-02-23/singapore-to-extend-tax-breaks-for-property-trusts-by-five-years" target="_blank">the tax amnesty on REIT foreign earnings</a> is a payback for such reform.
For Australia, the much vaunted housing supply mantra is being undermined by foreign investment in new homes. New re-zonings are being snapped up off the plan as a safehaven to park money. The mobility of capital is set to increase alongside technology, ensuring the commodification of housing escalates as the global housing marketplace matures. Housing supply alone cannot keep up with international demand for a commodity returning (barely taxed) huge capital gains.
<a href="https://www.prosper.org.au/wp-content/uploads/2014/11/Speculative_Vacancies-2014_final.pdf" target="_blank">Our recent report</a> highlights the underutilised nature of many prime locations. It is important this measure expands to other cities to help the public understand just how extensive speculative holdings of housing are becoming. Then perhaps a more vocal political opposition will develop.
Until the unearned incomes in real estate are more highly taxed, the pressures on those trying to find a place to live will continue to grow.
Karl Fiztgerald is project director of <a href="https://www.prosper.org.au/" target="_blank">Prosper Australia</a>.
This article first appeared on Prosper's website.
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