The Property Council of Australia has made a submission to the federal government that warns of the consequences of the government’s proposed changes to foreign investment rules.
One of the Property Council’s concerns is the government’s proposed fee structure, which would make investors pay a $5,000 application for properties valued at less than $1 million.
This will reduce foreign investment in new housing construction, most of which is aimed at properties valued between $600,000 to $800,000, according to the submission.
The result will be fewer new homes and therefore higher prices, the submission said.
The Property Council believes fees should not exceed $1,000 per application for new residential stock.
“Sydney is already on track to have 190,000 less homes than will be needed in the next 10 years,” it said.
“The policy proposal, as it currently stands, will see that figure climb and more Australians locked out of the housing market.”
The Property Council warned that higher fees would threaten foreign pre-sales for apartment developments, which could lead to those projects being cancelled.
“This investment underpins new developments, and allows Australian purchasers access to housing supply that would otherwise not exist,” the submission said.
Every new home that a foreign investor buys allows up to four other homes to be built for Australians, according to the submission.
Property Council chief executive Ken Morrison said the government is in danger of making the “already acute problem” of housing affordability significantly worse.
“Less new homes means greater competition and higher prices, making it harder for first home buyers and others, particularly in the $400,000 to $800,000 price range,” he said.
The Property Council said one of the big problems with regulating foreign investment is that the current data is insufficient.
Its submission therefore proposes the establishment of a residential investment data repository to be funded by an administrative fee on foreign investment applications.