The Australian housing market is at a pivotal moment. Tim Reardon, Chief Economist at the Housing Industry Association (HIA), has highlighted a significant perspective in the ongoing debate about housing shortages in Australia. Following the announcement by Treasurer Jim Chalmers MP on 10 December regarding higher foreign investment fees for housing, Mr Reardon has offered a counterpoint that merits serious consideration.
At the heart of Mr Reardon’s argument is the belief that the government’s approach towards foreign investment in the housing sector requires a major rethink. Contrary to popular belief, he argues that foreign investors are not the root cause of the housing shortage in Australia. He emphasises the need for the government to attract more foreign investment, rather than increase taxes on them, to address the acute shortage of housing stock in the country.
Reardon challenges two prevalent misconceptions about Australia’s housing crisis. Firstly, the belief that a large volume of homes in Australia remains vacant. He references data from the Australian Bureau of Statistics (ABS), which has consistently reported that around 10% of homes were vacant on census night since 1986. This figure, according to Mr Reardon, aligns with other developed economies and is not the underlying cause of the housing shortage. He explains that these ‘vacant homes’ often include those temporarily unoccupied due to holidays, renovations, sales, or being located in regions with fewer employment opportunities.
Secondly, Mr Reardon addresses the issue of foreign investment in the Australian housing market. He notes that since 2015, punitive taxes have been imposed on foreign investors by State and Federal Governments. This has led to a significant withdrawal of these investors from the Australian market. He underscores the correlation between the imposition of these taxes and the noticeable decline in the volume of apartments commencing construction – almost half of what it was in 2016.
The crux of Reardon’s argument lies in the constructive role that foreign investors play in the housing market. They contribute significantly to building new homes but do not occupy them, nor can they take these properties out of the country. According to him, foreign investment is central to addressing the housing shortage and is particularly crucial for Australian renters who are disproportionately affected by the housing inequity.
He also points out that one in ten Australian detached homes are built by foreign-owned companies, which are increasingly finding it difficult to invest in Australia due to the government’s punitive tax regime. This, Reardon argues, is exacerbating the housing shortage.
Mr Reardon calls for a shift in government policy. He urges the government to reduce the tax burden on foreign investors and stop increasing the cost of building new homes through additional regulatory and tax impositions. He also suggests assisting local councils to invest in infrastructure as a way to alleviate the housing crisis.
Although changes in this year’s Federal Budget are aimed at assisting domestic institutional investors to build new homes in Australia, Reardon notes that they have not yet filled the gap left by the exit of foreign investors from the market.
Reardon’s insights offer a fresh perspective on the housing crisis in Australia. It’s a perspective that suggests a more welcoming stance towards foreign investment might just be the key to unlocking the door to a more stable and abundant housing market for Australians.
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