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Banning Foreign Investors: Is It A Good Idea?

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Foreign residents were recently banned from buying homes in New Zealand, in order to impede housing inflation and rising vacancy rates. With similar problems in Australia, there have been discussions on whether the country should follow suit or not.

In her interview with SBS News, Property and Housing Management Researcher at the University of Tasmania Dr. Erika Altmann shared her insights regarding the proposed idea.

She said that unless one looks at it in a very specific point of view, curbing foreign investment even further will not necessarily solve Australia’s affordability crisis.

“Where more regulations might have some impact is in individual areas that have high concentrations of foreign investors, which are locations typically close to cities and close to public transport.

“But if you’re looking at the housing affordability landscape as a whole, it’s not going to have a major effect. This is a structural, historical problem. We can’t solve it just by taking out a small player out of the market, which is what foreign investors are,” she noted.

Dr. Altmann highlighted the need for a dedicated federal housing minster so that every issue furthering the problem can be discussed.

Those who think of the idea positively cannot be blamed. In fact, a lot of studies indicate that many Aussies put foreign investors at fault for the condition of the housing market.

According to SBS News, there was a 2017 survey, which showed only 18 % of respondents believed that foreign investors should be permitted to acquire residential houses in Sydney. A very small number of people (17%) expressed that the government is regulating foreign housing investment effectively.

To gauge the situation more, academics were asked about the effect of foreign investors in the Australian market. Program Director of the Master of Urbanism at the University of Sydney Dallas Rogers said that with the limited data at present, “[he doesn’t] really know yet.”

“Foreign investors make up a relatively small amount of money in the grand scheme of things, the overall housing market.

“But what we don’t know is what the inflationary impact is at the level of neighbourhood level. We don’t know what the inflationary level is at those micro scales, but at the macro level we know that it’s actually not that great,” he said.

Data from last year’s ANZ Bank Study showed that foreign buyers make up 13% of property transactions in known areas between 2015- 2016.

However, in the 2018 Foreign Investment Review Board’s (FIRB) report on the housing market, it was found that foreign investment dropped by two-thirds during the 2016-17 financial year.

Following the same trend, Chinese investment declined by around 50%.

Altmann had the same view and emphasised that there is a need to better monitor the market.

“The government’s reporting requirements need to be more transparent and regular. At the moment we’re relying on annual reports,” she said.

“Until we get a much better and regular look at the numbers, it’s going to be hard to get truly up to date figures.”

Thus, it is evident that a drastic step, such as foreign investment banning, to solve the problems of the home market would need a more careful and advanced study.


This article provides general information which is current as at the time of production. The information contained in this communication does not constitute advice and should not be relied upon as such as it does not take into account your personal circumstances or needs. Professional advice should be sought prior to any action being taken in reliance on any of the information.

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