James Paterson (Victoria, Liberal Party) Share this | Hansard source

I think there is one issue on which everyone in this chamber does agree on, and that is that housing affordability is a serious issue and a serious challenge, and it is particularly affecting young people in Australia. As I have said in this chamber before, I am keenly aware of that, as a younger person myself, because it is my friends, my family and other people in my age group who are right now struggling to enter the housing market, who are struggling to save for a deposit and who are worried that they will never be able to pay off a mortgage on a home they would like to live in. So I agree with the concerns raised by fellow senators in this debate so far that housing affordability is a serious issue.

I might shock Senator Cameron here, but I agree with him in part as well. I agree with him that although foreign investment in housing is an issue, it is also right to say it is not the most important issue—it is not the key issue in housing affordability. That is where I disagree with One Nation senators. This government has done a number of things to ensure that foreign investment in housing is appropriate and is regulated as it should be. In a moment I will go through and document for the record some of those initiatives. But it is very misleading to come in here and to tell young people in Australia that the reason they cannot buy and cannot afford a home is that foreign investors are stopping them from doing it. The truth is, and the evidence shows, that this is only one small part of the housing affordability problem. This is a much more complex problem and a much broader problem. To come in here and give people false hope that if we somehow shut off foreign investment in housing tomorrow all of a sudden housing will become affordable and achievable for young Australians is misleading, and I think that is a wrong thing to do.

Where I disagree with Senator Cameron is that rich people are the people to blame for the housing affordability crisis. Rich people are not to blame for the housing affordability crisis, just like they are not to blame for non-existent crises in every other product and service market in Australia which does not have an affordability crisis. No-one comes into this chamber and talks about the national bread affordability crisis, the national milk affordability crisis or the national newspaper affordability crisis. The reason no-one comes in here and talks about an affordability crisis in those areas is because there is not an affordability crisis in those areas. The reason there is no affordability crisis in those areas is there are no artificial government restrictions on the supply of those products or services. If ever price and affordability became an issue in those markets the increasing prices would provide ample incentive for people to enter into those markets to provide those products and services and they would keep those prices under check and under control.

Unfortunately, that is not possible in the housing market. If ever there were a market with incentive to get into, the housing market is it. Prices have skyrocketed. There is profit there to be made. One would think rational, profit-seeking people would be leaping to get into the housing market to provide houses for people to increase the supply of homes and, in doing so, help lower the price of homes. Their inability to do so is not because of their unwillingness or a lack of interest in doing so, but it is because of the artificial restrictions governments have placed on the supply of housing.

The truth is, when we talk about a housing affordability crisis, what we really mean is a land affordability crisis. Yes, the home on top of the land is a bit more expensive than it used to be, but not dramatically so—not 50 per cent more expensive in one year, for example, which is the kind of price increase we have seen in my home state in the city of Melbourne, or a 60 per cent increase, as we have seen in Sydney. What accounts for that spectacular increase in price is the increase in the value of the land that sits underneath the home. It is a land affordability crisis that we have.

In every other market, if we had an affordability crisis, what would we do? We would seek to increase the supply of that scarce good and hope that the prices would fall, as they always do. In this market, though, governments and, particularly in this place, state governments and local governments have artificially restricted the supply of land. So people who want to supply the market and want to provide more affordable homes have less ability to do so.

For the record, I want to detail briefly some of the foreign investment controls that this government has put in place to respond to the concerns of the community that it is a factor influencing housing affordability. For example, in the most recent budget we limited foreign ownership in new developments. The government has ensured that dwellings in new developments in Australia will be kept available for Australians by introducing a 50 per cent cap on foreign ownership in new developments. That means that for Australians who want to buy a home in a new development, whether that is an apartment block or a housing estate, at least 50 per cent of that will be quarantined and set aside for local buyers and only 50 per cent of it can go to foreign buyers.

Another measure in this budget is to charge foreign owners who leave their residential properties vacant. One of the persistent concerns in the media has been that foreign investors are buying properties here in Australia and not leasing those properties and not making them available to be rented and that that is contributing to the lack of housing affordability. So one of the measures announced in the budget this year is that, if a foreign owned residential property is left vacant for more than six months in a year, a charge will be levied on that foreign owner equivalent to the foreign investment application fee which was paid at the time of application. This initiative hopes to encourage those foreign investors who might be buying homes in Australia and leaving them vacant to make them available to rent, because housing affordability is not just about purchasing a home; it is also about being able to rent a home—and the greater the availability of rental property, the better.

Another initiative in this budget is to improve the integrity of capital gains tax rules for foreign investors to make sure that the law is being adhered to there. We do not want foreign investors to avoid capital gains tax that they are required to pay and we do not want to encourage people to invest in homes in Australia under the false belief that they can avoid capital gains tax. They need to pay the capital gains tax that is required. We are assisting in this area by bolstering the foreign resident capital gains tax withholding regime by increasing the withholding rate from 10 per cent to 12½ per cent, as well as increasing the number of foreign residents caught in the regime by reducing the threshold from $2 million to $750,000.

Of course, that is not the only initiative in the budget on housing affordability. One measure which I know is particularly valued by young Australians is the First Home Super Saver Scheme, which allows them to use their superannuation account to save towards a deposit for their first home. Contrary to speculation and perhaps some fearmongering in the media, this is not a drawdown on the compulsory contributions that they pay through their income into superannuation, but it is extra contributions that they choose to make from their before-tax income above and beyond the minimum 9.25 per cent contribution that they make. They will do so in a tax concessional way which will allow them to save more quickly and to save more than they may have otherwise been able to save. We hope that that will solve one of those issues in entering the housing market. Servicing a mortgage is a difficult thing to do, but what many young people say is an even more difficult thing to do is to save a sufficient deposit to get into the housing market in the first place.

There are other initiatives in the budget, including a National Housing Infrastructure Facility and unlocking Commonwealth land, which is one of the few levers that the Commonwealth government has when it comes to land supply. The Commonwealth is a landholder and landowner and the government is seeking to make as much of that as possible available for home development. I think that is a really important and welcome initiative. One of them is in my home state of Victoria, in the suburb of Maribyrnong, which could build, I believe, up to 6,000 dwellings. That would be a really substantial increase in supply in an inner urban area of Melbourne. That is a really welcome initiative.

But, as I conclude, I think it is worth pointing out, as I have done before in this place, that overwhelmingly the levers to improve housing affordability lie with state governments and local governments. While ever they choose to artificially restrict the supply of land—both on the fringes of our cities, with urban growth boundaries, as we have in my home state of Victoria, which limit development outside of that boundary, or within urban areas by heavily restricting what one can build on a plot of land, with how long it takes to get approval and how expensive it is to do so—housing will not be as affordable as it should be. All the international evidence shows that cities around the world that have the most liberal and open land release policies and the most liberal and open development procedures and policies are also those which have the most affordable housing. There is no reason why Australia could not have that too. We have a plentiful supply of land and that will require some change in attitude from our state and local governments.