Sam Murden
Updated 13 Jan 2023, 1:43pm
First published 13 Jan 2023, 1:25pm
Many auction sales across Sydney are sold to local buyers, as opposed to overseas bidders.
A recent decision to block foreign buyers from purchasing residential properties in Canada has spurred calls for Australia to follow suit.
Canada and Australia have experienced similar surges in property prices over the past year, with cities like Vancouver and Toronto recording rises similar to Sydney and Melbourne.
The move to ban foreign buyers purchasing residential properties for two years was announced late last year, with Canadian Prime Minister Justin Trudeau hoping to relieve pressure on the market.
The Toronto skyline: Canada has blocked foreign buyers from purchasing homes for two years.
The ban includes detached homes, semi-detached homes, units, and apartments in metropolitan areas.
Refugees, international students and temporary work visas are still allowed to purchase properties.
InvestorKit founder and head of research Arjun Paliwal said Canada’s move to lock out foreign says will make little to no difference to Australia’s market if replicated.
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A rise in cost of living and increased mortgage rates are putting pressure on the Australian housing market, with prices predicted to continue to fall sharply over the coming year.
“Australia following along with other countries on a ban for foreign buyers of property would be a decision that is misguided and one that would not make any meaningful difference to housing affordability.
“In Australia, we already make foreign buying of property difficult through regulations and expensive through surcharges and taxes. Adding a ban would do little to nothing for greater housing affordability.”
Mr Paliwal pointed to the federal government’s Register of foreign ownership of residential land as an appropriate mechanism to increase transparency around foreign purchases and sales of residential properties in Australia.
Some experts argue banning foreign owners from purchasing property in Australia would not make it easier to enter the market. Picture: NCA NewsWire / Christian Gilles
There were an estimated over 5,000 transactions from July 2020 to June 2021 that involved foreign ownership – equating to just 1 per cent of total transacted stock across the country.
“Clearly, many are misled by the volume of transactions by foreigners,” Mr Paliwal said.
“New dwellings represented 68.6 per cent of purchase transactions, followed by 18 per cent for vacant land, and 13.4 per cent for established dwellings in 2020‑21.
New Zealand placed restrictions on foreign buyers in August 2018.
“This means foreign buyers are supporting housing supply creation as only 13.4 per cent of a very small base of transactions go on to compete in the established market.”
New Zealand placed its own restrictions on foreign home buyers in August 2018, banning most non-resident buyers from purchasing existing homes.
It also classified the properties as “sensitive land” and introduced a residency test to avoid locals from being priced out of the housing market.
In order for a foreign buyer to purchase a property in Australia, they need to submit an pplication to the Foreign Investment Review Board.
Any investment property must be a new property or vacant land, it cannot be an established dwelling.
A buyer must live in any established dwelling that they purchase and then sell it once they no longer live there.
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