Dear Tony, waving a stick at foreigners won't help first home buyers: Terry Ryder
Tony Abbott is on a yellow card and is one major mistake away from being red-carded.
Another display of the bad judgment for which he has become infamous and he’ll be kicked out of the game by his own team.
Un-phased, the Prime Minister is already working on his next own goal.
He’s made it known that he’s going to clamp down on foreign investors. Someone has managed to convince him that somehow this will bring down the price of houses and first home buyers across Australia will rejoice.
He’s getting seriously bad advice from somewhere. He could eliminate every foreign investor from the Australian residential landscape and it wouldn’t reduce a single home price.
Of all the buying sectors in residential property – first time buyers, next time buyers, local investors and foreign investors – overseas buyers are the smallest and least influential. The recent NAB survey confirmed this.
In the established homes market, where first home buyers are most active, overseas buyers are a negligible component.
Foreign investors are active primarily in the new homes market. They buy highrise apartments off the plan in the major inner city markets. This is not a market for first home buyers.
These two sectors – first home buyers and foreign investors – are not competing in the same space.
Abbott’s stance is an outcome of the federal parliamentary inquiry into the “affordability crisis”. This has been a farce from the beginning because it was based on the notion that first home buyer numbers had dropped alarmingly – which is now revealed as a miscount by the Australian Bureau of Statistics.
So the initial premise arose from a mistake and Abbott proposes to compound the error with another, by blaming an innocent party for a non-existent problem.
The inquiry received evidence that foreign investors assist first home buyers because they’re the motivation for the construction of multiple highrise apartment buildings. The increase in supply is deemed likely to bring down prices, thereby assisting first time buyers.
I would suggest that’s a flimsy argument, but that’s what the pointless inquiry was told.
The strangest thing in all this is that the Prime Minister imagines Australians will thank him if he succeeds in reducing the value of homes across the nation. Given that seven out of 10 households own their homes, he’s on a confirmed loser with this one.
But whatever he does with foreign investors won’t affect the pricing levels created by market forces.
Once again, politicians are tinkering at the edges of the affordability issue. A leader serious about making new homes more affordable for first time buyers would address the single biggest issue – the taxation component in the cost of a new home.
New homes are a lot more expensive that established ones (which is a primary reason why first timers target established homes). The research indicates that as much as 40% of the price of a new house and land package is government fees and charges.
Dealing with that is simply not palatable for your average politician. Abbott is doing what politicians always do with the affordability issue – they talk about it a lot, but in essence they do nothing meaningful. A solution is within their power but they refuse to go there.
So the chosen course of action is once again taken from the scripts of Yes Minister. Find an unpopular minority and vilify them in speeches and press conferences, but at the end of the day do nothing that changes the status quo.
It won’t take long for people to realise that waving a stick at foreign investors hasn’t changed anything for first home buyers.
Poor Tony. When he needs to be riding a winner, he’s flogging a dead horse.
Or is it a case of dead man walking.
TERRY RYDER is the founder of hotspotting.com.au. You can email him or follow him on Twitter.
If you missed our free webinar with Terry Ryder, 'The Best and Worst for 2015: Top 5 Hotspots and 5 Places to Avoid', you can watch the video or download the slides here.