We’ve heard a lot of talk about housing affordability from both sides of politics lately. It’s a persisting issue affecting a huge portion of the population, so any decisions made get a lot of news coverage.
If you’ve had an eye on the news lately you may have seen Labor’s latest major decision around housing. They’ve announced a policy, set to commence on April 1 2025 and run to 31st March 2027, whereby foreign investors are banned from purchasing existing homes.
Today we want to take a look at this move. Will it be successful or is it just an opportunity to gain political clout? How will it affect the real estate market, and will have any impact on The Henry Wong Team’s® operations and our clients?
Reasoning for the Ban
Part of the 32 billion “Homes for Australia” plan, the ban brings into focus government efforts to boost housing supply and help Australian citizens secure homes. According to Housing Minister Clare O’Neil its objective is to “ease pressure on our housing market at the same time as we build more homes.”
By restricting foreign acquisitions of established dwellings, properties will be freed up for local buyers. This will enhance accessibility for Australians struggling to enter the housing market. That’s the theory anyway – but with foreign ownership of homes sitting at 2%, we wonder what effect any purchases in the next two years would have had on the overall housing situation?
As well as the ban, the minister announced a crackdown on foreigners ‘land banking’ vacant land in Australia. This is a process where they purchase vacant land and sit on it in anticipation of an increase in value so they can sell it on for a profit. The problem with this is it limits land available to Australians for residential developments.
To work against foreigners’ land banking, the government is offering an increase in funding to the Australian Taxation Office (ATO) and Treasury. This is intended to help enforce development conditions and ensure acquired lands are used and developed within a reasonable timeframe, instead of sitting empty.
Political Motivations and Context
Housing affordability is a major issue in politics, and its no secret we’ve got a general election coming up. Each party is going to make their method of dealing with the housing crisis known, and they’re going to be vocal about it. They’re under pressure from the people, and the party with the policy that resonates could swing the election.
Interestingly, Peter Dutton proposed a similar policy banning foreign purchases of existing homes in his budget reply address last year. The policy resonated with voters and got him traction on social media. Labor has now mirrored the policy in a response they hope will align them with public sentiment.
That fact starts to make this look far more like a political strategy move than a move that will have major impacts on the housing market.
What do the Critics Say?
Most critics point to the data indicating that foreign-based investors account for a small fraction of the Australian housing market. There are high taxes in place on temporary residents or foreign residents buying homes, which makes it extremely costly. Consider that in the 2022-23 period, foreign investors made 5,360 residential property purchases. Of these, only about one-third involving existing properties. That’s a drop in the ocean of the overall market.
What Does This Mean for our Vendors?
At The Henry Wong Team®, one of the main reasons we get chosen by Brisbane vendors to sell their homes is our expansive network of buyers, which stretches across Australia and overseas too.
So will this ban on foreign buyers affect our sales in any way? In all honesty, it won’t. Very few of our sales end up going to foreign-based investors – mirroring the overall statistics for Australian property sales. Most of the foreign buyers we engage with are either residents of Australia or dual citizens with their original home country.
When we engage with a foreign investor from our network, the likely scenario is they are purchasing a property for their family who live in Australia. For example, their kids came to university here and ended up settling down in Brisbane, and the foreign-based parents want to help them out with their first property.
Get in Touch with The Henry Wong Team®
If you have any questions on the foreign-buyer ban Labor has implemented, we’re here to answer them. Will it have a huge effect on property prices? Is it just political posturing? Let’s chat about it, particularly if you’re worried in any way.
We’re always available to talk about Brisbane real estate and government policy that affects it. Get in touch today!
