1 April 2015
Transcript - #2015021, 2015

In the role of: Parliamentary Secretary to the Treasurer [23 December 2014 - 20 September 2015]

Interview with Beverly O’Connor, The World, ABC News 24

SUBJECTS: Foreign investment in residential real estate

O’CONNOR:

Figures out today suggest the Reserve Bank's decision to hold interest rates at record lows did not spur buyers on during the March quarter but markets in Melbourne and Sydney are still growing at worryingly strong levels. Foreign investment has been seen as one of the drivers of the domestic market, locking out domestic buyers in many parts of the country. The chairperson of the parliamentary committee that looked at that issue, Kelly O'Dwyer, says new rules and regulations should rein in illegal purchases.

O’DWYER:

We think that the framework that was put in place where there is a difference between those properties that are new properties, which we encourage foreign investment into, and those properties where we have some restrictions around it, so the existing property market, we think that having a national register where we register who purchases what, having increased penalties for those people who don't abide by that framework, we think that that will have an impact on people making sure that they are obeying the laws as they presently stand. We're not looking at changing the laws, we're simply looking at making sure those laws are enforced. What we found during the inquiry was that the laws weren't being enforced. There had not been one divestment of illegally purchased property since 2006.

O’CONNOR:

Of course the resources given to regulating it were woeful. Will they be substantially increased?

O’DWYER:

Absolutely, the resources will be increased. We had really strong concerns during the inquiry phase that the Foreign Investment Review Board didn't have the capacity to deal with the levels of foreign investment that were being invested. Happily, we have seen a doubling of the investment into the residential real estate market from 2012/13 to 2013/14. Where that money is channelled towards increasing housing supply that's great, but where that money is perhaps going into purchasing existing homes, where it's a non-resident foreign investor, we need to make sure the rules are being enforced and we need to give the right resources to the Foreign Investment Review Board to undertake auditing and compliance. The option paper highlighted that the Foreign Investment Review Board can't do it all, that we need a modest application fee in order to get the resourcing that is required and that the ATO can also be utilised to match up the data to make sure that people who are purchasing are entitled to purchase and that those who are not entitled to purchase don't make those purchases.

O’CONNOR:

Will that application fee in total be used for regulation?

O’DWYER:

A large amount of that money will go directly towards setting up the new national register and it will also go towards the new unit that is being set up with the Australian taxation office, that will provide a lot of the investigative work, the auditing and compliance work, and the enforcement of penalties which will ultimately be done by the Foreign Investment Review Board. A substantial amount of money will go towards setting that up and incentivising the States to make sure we get them on board to get the register up and running as quickly as possible.

O’CONNOR:

Let's talk about the new developments you speak of and it seems as if some people believe it's being driven by external forces rather than necessarily domestic demand and you hear stories of apartment blocks going up and not been in fact even lived in. Did you not look at perhaps trying to curb that kind of activity?

O’DWYER:

There is huge demand locally and we know that. We are not keeping up with demand, in fact one of the big questions around housing affordability is this question of supply and we are short 190,000 dwellings each and every year according to the latest statistics so we need to be able to build more property so that that we can meet that demand. Certainly there is off shore demand. We are a really stable place to invest and where that off shore demand means that we are building new dwellings which are available for purchase and for rent, that's a really great thing, that's a win-win situation for everyone. We did have some concerns raised during the inquiry about whether or not the occupancy levels, particularly of new apartment blocks that were being built, were appropriate, whether they were being occupied, and we didn't have a lot of evidence around that other than anecdotal evidence and one of the reasons that we are having a national register will be to gather more information not only about who has purchased what but we will be able to then utilise that information to match it up with data as to whether or not those properties are occupied.

O’CONNOR:

We're seeing figures out today still suggesting that the market is running quite hot.

O’DWYER:

What we want to make sure in Australia is that the lending criteria that banks apply are appropriate, that we are not going to get into any trouble in relation to that and we have a very good and strong prudential regulator, APRA, who puts in place very stringent regulatory requirements to make sure it is appropriate. But, as I said to you before, there are lots of issues that impact those property prices. Foreign investment, some people have suggested, is one of those elements and certainly there was evidence from the Reserve Bank that did suggest that in certain suburbs, in certain areas and in certain price brackets it can have some impact but it is by no means the only impact. As I said, it's far more complex than that.