Foreign property buyers are not to be blamed for pricing local first-time buyers out of the housing markets, says the Reserve Bank of Australia (RBA). The RBA is of the view that foreign investment may be partially responsible for pushing up home prices in some areas, but not where the first-time home buyers are “concentrated”.
The RBA’s observation has come at a time when the growing interest of overseas investors in the Australia’s residential market sparked a debate raising fears that the expatriate buyers were making housing unaffordable for locals, especially the first-time buyers.
The debate prompted the Federal Parliament's House Economics Committee to look into the issue. The committee even held public hearings in "real-estate hot spots".
''….part of any increase in foreign housing demand may spill over into higher dwelling prices, though the data suggest that this has not been into the parts of the market where Australia's first home buyers are typically concentrated,'' the RBA says.
The RBA’s observations are based on data suggesting that foreign investment in residential housing are only between 5% and 10% of the total market turnover.
Australia's Foreign Investment Review Board (FIRB) gave permission for 11,668 residential property purchases by foreigners in 2012-13. Investment from outside Australia pumped AU$17 billion (US$15.79 billion) into the housing market during that period.
The RBA’s observations parallel those of the Real Estate Institute of Australia (REIA). In a submission to the parliamentary committee probing foreign investment, the REIA warned that more restrictions on foreign investment would prove a drag on construction and other related sectors.
The REIA noted in its submission that the foreign investment has contributed to the supply of new dwellings, as foreigners are not allowed to buy established housing units.
All non-residents must obtain permission from the FIRB before buying residential property in Australia. They are not allowed to buy an established (previously occupied) house. They can only buy an unoccupied new dwelling, if the FIRB feels that the Australia’s housing stock has increased i.e., if the purchase of houses by foreigners will not cause shortages for native Australians.
Temporarily establishing residence in Australia for the purpose of buying a house is not a viable alternative to obtaining FIRB permission, since temporary residents must sell their property if they leave Australia.