Restoring The Balance

Posted by Daniel Joseph

The federal government released a new budget earlier in the month, and there were some key changes that will effect property supply going forward.

A cap was introduced to any development applications submitted after 9 May 2017, limiting the total number of dwellings in a development that can be sold to foreign investors to 50%. Putting this cap in place will limit previously unrestricted levels of foreign investment, which will in turn effect new property supply.

Restricting foreign investment in this way will make it harder for international developers to get their projects off the ground, because they previously had a competitive advantage over their local counterparts.

There was previously no limit on the number of foreign sales that could be made in a development if an overseas bank was used, meaning the entire project could potentially be sold to international buyers. This change ensures international developers will have to comply with the regulations currently enforced on local vendors.

We’ve reported for a while that the market tends to self-regulate supply and demand. Regulatory interference is likely to limit supply further, which doesn’t bode well for housing affordability. Economist Saul Eslake hit the nail on the head when he said it’s ‘much easier for (regulators) to make housing affordability worse rather than better’ and the government appeared to be toying with ‘more ideas that would make it worse’.

Ultimately, restrictions on foreign investment make local investors a crucial component in project feasibility. This gives us great negotiating power when we first acquire a project and allows us to get you some great incentives when you purchase. It’s a great time for Aussie’s to be in the Australian property market.

Posted by Daniel Joseph, on 23rd May 2017