Foreign property investment – do you care who owns it?

Recently, Lendlease, which is Australia’s largest owner, operator and developer of senior living communities, reportedly sold a good chunk of their retirement village business to a Dutch pension fund. Foreign investment in Australian commercial property is certainly nothing new and in 2016, was particularly strong hitting a record $10 billion. And we’ve all heard the stories that foreign investors in our residential properties are pricing out the locals.

But what does foreign property investment really mean for Australia? Does it matter who owns the property if tenants, whether residential or commercial, are getting what they need from it?

Now in the residential sector, there’s been plenty in the press about cashed up foreign investors buying up houses at top dollar, essentially locking out local buyers, particularly those looking to purchase property for the first time. But is this foreign investment really driving up housing prices? The research says no.

Australia has fairly tough foreign investment rules. The Foreign Investment Review Board mandates that non-residents can only purchase newly built dwellings, not already established homes. Data shows 80% of first-home buyers purchase established homes – the competition with foreign investors simply isn’t there. Foreign investors are also more interested in high-end properties, valued around the $1 million mark, certainly not the realm of most first home buyers.

In fact, for every new house purchased by a foreign investor, enough money is brought in to enable four more new houses to be built. This investment helps to drive the construction sector while adding to the supply of new homes and increasing rental property supply. And while capital growth remains strong, foreign investors will continue to support the industry.

And this brings in the commercial side of foreign investment. Lendlease have said that investment from the Dutch pension fund will enable them to increase the number of new units developed from 200 to 500 a year. This ensures the demands of new residents are met but it will also create hundreds of jobs over the coming years, stimulating the construction industry and local economy. Without foreign investment in the commercial sector, a number of building projects simply wouldn’t be viable and the impact would be felt across the broader community.

So this brings us back to the question – do you care who owns the property? Foreign property investment is clearly positive for the Australian economy by stimulating industries, creating jobs and wealth and increasing housing supply. Even though these investors receive a return on their investment, the positives their investment brings the Australian economy is well worth it.

What do you think? If tenants’ needs are being met then does it really matter if the pocket it goes into lives here or overseas?

How do you think those people over 55 who have purchased a retirement home for somewhere between $380,000 to $1million+ from an Australian company in a community village (and who do not own the land their retirement home sits on) feel about waking up to the news that their village and hence the land their home sits on is now owned by a foreign company?

Do you think the Foreign Investment Review Board (Federal Government) should limit this practice?  Or legislate to protect the home owner?

We think this is a debate that could go on for quite some time but we’d be interested in hearing your experiences with foreign investment and whether it is a good thing for Australia or not.

Links:

http://www.yourinvestmentpropertymag.com.au/news/foreign-investment-in-aussie-commercial-property-remains-strong-229471.aspx

http://www.lendlease.com/au/living/retirement-living/

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