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Wednesday, 18 March 2015
Page: 2902

Mr IRONS (Swan) (12:14): It is a pleasure to be able to rise and follow the member for Mallee, and I thank him for his input on this report. Even though I am not a member of the committee that this particular report was produced by, I feel that I should comment because of the amount of construction of new apartments going on in the electorate of Swan and because of the deep interest in foreign investment in Western Australia of many Western Australians, particularly in my electorate of Swan, and I know some real estate agents and property developers have contacted my office. So I had a look through this report, and there were some parts of the report that I thought were vital to get on the record, for the people of Swan and also for those people who have contacted my office. So I will be quoting directly from the report but I think these items need to be put on the record for the people in Swan.

The first part of the chair's foreword to the report really lays out the reasons behind this report. It says:

Residential housing has been, and will always be, an issue that is at the forefront of community debate and discussion.

And I know the member for Mallee highlighted that particularly in his speech and put it in a very succinct way. The foreword continues:

Owning your own home is part of the great Australian Dream. For many it represents the opportunity to build a future, it represents connection with community and security for family.

Buying into the Australian Dream doesn't come cheap. According to a recent International Monetary Fund (IMF) report, the current ratio of housing prices in Australia to average incomes is 31.6% above the historical average.

Is it any wonder then, that many Australians now worry that home ownership may be out of reach for them, for their children, or for their grandchildren? At the same time, Australians worry about rental and interest costs, and their impacts on the cost of living.

There is no one simple explanation for the decline in housing affordability—although lack of land supply, underdevelopment, state planning laws and regulations, local council red tape, and stamp duty and tax arrangements likely all play a part.

Over the years, however, many in the community have asked the question—what role does foreign investment play in residential real estate?

Just going back to housing affordability, I know that, when I bought my first house in Western Australia, in Scarborough, which is a place that many Victorians head to when they migrate to Western Australia, it was priced at around $25,000, and I think that within four years it had doubled in value, and now I think that same property would probably be selling for well over $1.5 million. So, as to an explanation of why there is not a generous amount of housing affordability in the community, these price increases are one reason.

I also note that the report mentioned local council red tape. We have a planning commission in Western Australia as well, which is looking at increased density in its planning for the outbreak of new housing. That flies in the face of what we have seen, because we have seen that a lot of social issues have come from increased density, and I think that they need to reverse that decision and head back to having affordable housing and releasing land, because there is one thing we are not short of in Western Australia, and that is land—there is plenty of it.

Mr Broad interjecting

Mr IRONS: And quality land, as I hear from the member for Mallee. But that land should be unlocked and released so that those who are prepared to live in outlying areas and who do not want to have a McMansion but are happy to start off, as many of us did, with a small place with a true outhouse—and I am sure that when I grew up the first place that I lived in had an outhouse, and the first place I bought had an outhouse—may afford to buy. So the community expectations that make people live in McMansions need to be cut back, I think, and people need to lower their expectations and start off on a small step, which will make housing affordability a lot better. So I ask that the Western Australian government also look at making sure that they release property that people can afford to buy.

I think it is important to get on the record what the current investment framework is in Australia. Under our current foreign investment framework, as it applies to residential real estate, foreign investment is channelled into new housing so that more homes and apartments are built, meaning more opportunities for people to purchase. It also contributes directly to economic activity, generating employment for builders and suppliers and all the associated trades.

When it comes to existing homes, there are generally prohibitions and restrictions. Non-resident foreign investors are prohibited from purchasing an existing home and temporary residents on visas of more than 12 months can purchase just one existing home to live in while they are resident in Australia, but must sell this home on their visa expiring. All purchases, whether new or existing homes, are required to be pre-screened by the FRIB and supported by the Foreign Investment and Trade Policy Division of the Treasury.

According to the FIRB statistics in the first nine months of this financial year, FIRB approved foreign investments into residential property of around $24.8 billion, 44 per cent higher than the $17.2 billion approved during the 2012-13 year. Much of the investment is concentrated in the Melbourne and Sydney markets. Most of the increases are attributable to proposed investments in new property which have been $19.3 billion for the first nine months of 2014—79 per cent higher than the 2012-13 year. The total number of established property approvals for the first nine months of 2013-14 is 5,755 compared to 5,101 in 2012-13.

Of the six public hearings that were held and after considering more than 92 submissions, the committee had four key findings that translated into 12 practical recommendations. The four key findings are:

First, there is no accurate or timely data that tracks foreign investment in residential real estate. No-one really knows how much foreign investment there is in residential real estate, nor where that investment comes from.

Second, there has been a significant failure of leadership at FIRB, which was unable to provide basic compliance information to the committee about its investigations and enforcement activity.

Third, if you are not prepared to enforce the rules, then it is less likely that people will comply with the rules. This is especially true if the consequences of a breach are not meaningfully adverse.

Fourth, currently the Australian taxpayer foots the bill for the administration of FIRB and FITPD, not the foreign investors applying for approval. This has arguably contributed to underinvestment in FIRB's audit, compliance and enforcement activities.

I think the member for Higgins, Kelly O'Dwyer, has done a magnificent job on this particular report. There are many more aspects of the report which I would like to go to, but I will go to the conclusion, which states:

In conclusion, the Committee found that the current foreign investment framework should be retained. In practice the framework has been undermined due to poor data collection, along with a lack of audit, compliance and enforcement action by FIRB. Australians are entitled to expect that the rules are properly enforced and our committee recommendations strengthen the ability to do this.

And the chair says:

I would also like to acknowledge and thank all of those people who have helped inform this inquiry.

In particular, those people and organisations that made submissions and presented evidence; those who sent letters and provided their views; the Parliamentary Library and the Parliamentary Budget Office for their efficient professionalism; and members of the committee, who took a very collegiate approach to this task.

In closing, I commend the report to the House and at the same time call on the Western Australian government to continue unlocking land to make housing affordability better for people in Perth and Western Australia.

Debate adjourned.