Friday, April 23, 2010

Overseas home buyers

Of late, house prices have skyrocketed, caused in part by foreign buyers. It is reported that 30-40% of property are sold to cashed-up Chinese buyers who are non residents in this country. They are able to do so when Kevin Rudd relaxed the rules after the global financial crisis of Q4 2008. Since then they have relentlessly snatched up properties here. Even when guidelines are breached, nobody is stopping them - until now. Today, Assistant Treasurer Nick Sherry announced the scrapping of those rules and at the same time tightened the enforcement. It is the same Senator Sherry who only three weeks ago denied that foreign investors were a factor in the Australian real estate market.

Politicians need to be educated. Too many of them are making unsound policies based on misconstrued beliefs. Senator Sherry believes that international investments will boost the number of houses available for people to rent. This is a fallacy. There is no significant increase in the number of homes built, so how can foreign buyers boost the number of rental houses? Foreign investment is good only if there is a need to bring in the capital. In this case, the problem is not capital; it is escalating land prices. This is caused by a huge demand; further fueled by the Chinese buying spree. I am only surprised it has taken Senator Sherry so long to see that.

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