Frances Bula header image 2

What do other Australian academics think of the role of foreign investment in crazy-high real-estate prices?

July 9th, 2015 · 2 Comments

I quoted two Australian academics on the topic in my May story. But are these two out of step with everyone else, renegades who don’t understand the stats?

There are, of course, many media stories and various experts saying foreign investment is having a huge impact.

But there are also many, like Philip Soos and Dallas Rogers, who I quoted, weighing in on other side. Here is what a few  other academics and housing/economics commentators have to say:

Stephen Kirchner: Research Fellow, Center for Independent Research: Foreign investors are not to blame for rising house prices. The real culprits are the taxing and regulating activities of Australian governments that raise the supply price of new housing.

Saul Eslake, chief economist from Bank of America Merrill Lynch, said negative gearing was contributing to the inflation of property prices to the point where Australians could find themselves in a “bubble situation.”

Kate Shaw, Future Fellow at University of Melbourne.

It is true that the main culprits for housing prices in Australia are taxation and regulation regimes, as argued by Stephen Kirchner last week. But this is more because of their impact on demand than supply.

Generous incentives including negative gearing and concessions on capital gains tax encourage investment in housing, to the extent that around one in seven Australian taxpayers now owns one or more investment properties.

As there is no limit to how many properties local investors can negatively gear, and with share markets volatile, investment properties are looking increasingly attractive. Australia already has one of the highest levels of household debt in the OECD due to borrowings for property purchases, and this is growing fast.

Overseas investors are adding to that demand. The Foreign Investment Review Board enables global investors to buy new housing in Australia. Along with Canada, Australia has emerged from the 2008 global financial crisis as a stable economy and good investment prospect, with one of the strongest property markets in the world.

Seven Things Keeping Property Prices High (and Foreign Investment Isn’t One of Them):


Categories: Uncategorized