When housing experts at City Futures and other Sydney unis put forward recently a national 10-point plan for housing affordability, there was a lot of interest and commentary... and a lot of the commentary was about foreigners buying Australian housing. Do we need an 11-point plan - or, as some commentators seem to suggest, a one-point plan - that bans or restricts non-permanent residents from owning Australian housing?
On the other hand, maybe we should be asking a different question: is there anything better suited to selling to foreigners than real estate?
Think about it: it's not as if they can take land and houses out of the country. There's no technology or intellectual property to appropriate, and no production lines to shut down or workers to let go.
And strictly speaking, they don't actually get ownership of the land itself, but rather a legal interest that entitles them to possession of the land... although whether they can actually personally possess it is altogether another matter (of Australian immigration law).
Selling title certificates to foreigners for something they cannot take away, and may not be able to visit, could be seen as quite a wheeze.
Nonetheless, there is plainly considerable demand from foreigners for Australian certificates of title to real estate. Its likely that there are factors pushing this demand towards Australian property that are beyond our control; and we should expect this demand to have effects on our market - but these effects are within our ability to influence.
Foreign demand, coming on top of domestic demand, will (other things being equal) bid up prices and bid out some local would-be purchasers. We might mitigate that effect by putting conditions on foreign spending: in particular, that it must increase the supply of housing. In fact, this is already the rule: the Foreign Investment Review Board will not approve a purchase of an existing dwelling by a non-resident, unless the dwelling is newly built or is to be redeveloped into additional dwellings - and that second category is proposed to be closed off shortly. The rules do allow temporary residents to purchase an existing dwelling, provided it is for their own housing; this means they are adding to demand for owner-occupied housing, but if they were banned from doing so, they'd only be adding to demand for rental housing, so over all is fair enough.
Obviously there has been a problem with compliance and enforcement of the present rules, and the Federal Government has proposed action in that regard. (Probably the easiest thing would be for the States and Territories, as the administrators of Australia's land titles systems, to require proof of citizenship, or permanent residency, or FIRB approval, as a condition for registering the conveyance of a title.)
It is also true that even though they may not possess it personally, a foreign owner's property right entitles them to decide if and how (subject to Australian law) the property will be used - including, specifically, if the property will be put to use in providing housing to the locals. If we're concerned about foreign-owned properties being left vacant, the best way to ensure that they get onto the rental market is to tax them. In particular, the gentle sting of a tax calculated according to the value of the land put to its best use, payable regardless of whether the owner has actually put it to use, is the best encouragement to getting properties to the market.
We do already have such a tax in each Australian State and the ACT - it's called land tax. If we're concerned too many properties remain vacant or underused, we should consider making greater use of land tax.
We might also be concerned about the prospect of increases in land values accruing to foreigners. After all, when it comes to land, no-one's making any more of it, even as the economy develops and we make more and better of just about everything else (housing, widgets, widget-servicing, etc), and because land is also a factor in the production of all those other things - even if it just lies there passively underneath - the owner of land can claim a share in the increasing value of this production. The answer, again, is land tax. Concerned that foreign owners won't pay land tax as it falls due? The liability attaches to the land title, so it will get them in the end.
Concerned that foreign owners may be bad landlords? Improve our residential tenancy laws for the benefit of local tenants, and enforce them (and charge the penalties to the title, too, if they're not paid).
The commentary that is currently at large about foreign ownership of Australian property raises some valid questions about the equitable operation of our housing system, but it ascribes to foreign owners problems and concerns that arise equally in relation to Australian property owners - both as speculator landlords, and speculator owner-occupiers. We already have in place the basic rules and mechanisms - but have fallen short on actual execution - for a reasonable regulation of the effects of foreign owners; where we have a lot further to go is in setting our property market generally towards the provision of more affordable housing.