Should Australia stick to Canada’s ban on foreign purchases?

Should Australia stick to Canada's ban on foreign purchases

The gossip regarding a ban on foreign purchases in Australia has increased as Canada began the year with a new strategy forbidding foreign investors from purchasing residential assets over the next couple of years.

The new law of Canada was passed because of the unusual spike in the cost of properties since the beginning of the pandemic, which several policymakers had blamed on foreign capitalists.

Justin Trudeau, Canadian Prime Minister, had mentioned in a report from CNN that the excellence of Canada’s housing market attracted “profiteers, rich corporations, and foreign investors.”

He added that this results in an underused and empty housing, rampant speculation, and increasing costs. He also said that houses are for people rather than for investors.

Canada and Australia have faced the same trajectory in the costs of houses since the beginning of the pandemic. Both are facing a decrease in price growth on the back of central banks’ increasing rates and potential purchasers feeling the rise of a heat in living costs.

Should Australia consider forbidding foreign investors?

Dr.Diaswati Mardiasmo, a chief economist of PRD Real Estate, mentioned that prohibiting foreign purchasers could raise the supply of residential assets.

Mardiasmo also mentioned to “Your Investment Property” that foreign investors own around 2.5% to 4% of residential assets in Australia. Therefore, initiating a “foreign embargo” would heavily grow the supply of residential assets if all the current foreign investors were pressured to sell their property, or at least would reduce the demand for their asset.

How are the asset purchasers from foreign managed?

According to the PRD Real estate, FIRB (Foreign Investment Reserve Board) tracks or classifies foreign purchasers as those without nationality or permanent residence in Australia.

As a result, every foreign purchaser needs to keep an application to the FIRB on a national level to get approval for acquiring any investment in the country.

- Published By Team Australia News

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