Don't blame Chinese for the housing boom
There is a long and unfortunate political tradition in Australia of using foreigners as scapegoats for problems, particularly if they are from Asia. This time it is Chinese investors, many from Hong Kong, who are being blamed by politicians for forcing up house prices and making it impossible for Australians to own their own home. In fact, the major causes are the lack of planning and infrastructure, and government handouts.
Australian Assistant Treasurer Nick Sherry announced at the weekend that all temporary residents buying property in Australia would have to apply to the Foreign Investment Review Board. Those who do buy property must sell it when they leave.
This 'crackdown' by the Australian government is in response to a perception that foreign buyers, particularly Chinese investors, are forcing up house prices in major cities - in part because a law that limited foreign students from purchasing a home for more than A$300,000 (HK$2.16 million) was relaxed last year.
The Age, a Melbourne newspaper, reported on Friday that a survey of 20 property agents 'found foreign buyers, mostly cashed-up Chinese, now account for 30 to 40 per cent of property sales'.
Property is a sensitive political issue in Australia because the level of home ownership has always been high. But, in the past decade, the dream of 'owning your own home' has become something of a nightmare, with the median price of a house in Sydney, for example, now over A$500,000.
But is all this the fault of Chinese investors, as the Australian government and some media commentators would have you believe? The answer is clearly 'no'. Key factors in the boom have been middle-class welfare and neglect by regional and national governments to release land and build infrastructure to service it.
Under former prime minister John Howard, the government introduced a A$7,000 grant for anyone buying or building their first house. The current administration increased it to A$14,000 but is now phasing it out. Combined with low interest rates and strong population growth, this stimulus helped house prices grow by 6.2 per cent between 2004 and 2009 and, this year, prices are up 10 per cent already.
Simple supply and demand is another major factor. There is a shortfall of about 200,000 houses, for which local and regional governments bear all or some of the blame. Poorly co-ordinated and inconsistent urban planning, a reluctance to build high-rises in inner urban areas and underfunding of infrastructure have contributed.
Blaming Chinese property investors will not make prices dip. It is simply another example of Australian politicians pandering to xenophobia and making foreign investment a scapegoat. Chinese investors and students don't vote, but homeowners do, so let's beat up on the former group.
Meanwhile, Australia's political class hides behind a straw man to cover its failure to make housing more affordable.
Greg Barns is a political commentator in Australia and a former Australian government adviser