Wealth Through Property founder Scott Levoune says foreign buyers can solve Australia’s rental crisis

A prominent buyers agent has proposed a controversial solution to Australia’s rental crisis, arguing a boost in foreign investors could cure the nation’s unhealthy property market.

Wealth Through Property founder Scott Levoune says it’s time to debunk the critical stereotypes associated with international buyers and to start welcoming them as the solution to boosting Australia’s rental supply.

While the nation’s rental vacancy rate is slowly increasing with a total of 36,785 properties available to lease Australia-wide in April this year, property data platform SQM research has declared a “rental crisis” still exists in parts of the country.

Additionally, weekly payments continue to soar across the capital cities with the median rent for a house at $757 per week, followed by $579 for a unit.

Mr Levoune says the law of supply and demand largely contributes to today’s competitive rental scene, with a lack of available homes to lease a result of an investor exodus off the back of the pandemic.

“Rent is increasing because too many investors left the market through Covid. Property prices went through the roof so (cashing out) is what you do when an investment grows a lot,” he told news.com.au.

“So a lot of these people have cashed out of the market and they’ve gone ‘hey it’s not worth jumping back in,’ so at the moment, we just don’t have enough investors in the market.”

And with the cost of living also driving up the value of properties, the entrepreneur argued not everyone can afford to buy a house, explaining those that do have money and want to invest should be welcomed to do so.

“A lot of people are going to be relying on investors to create rental property, and the more investors we have out there, the more opportunities are offered to renters which creates competition at lower price levels,” he said.

How foreign investors fit into the equation

Mr Levoune asserted it is unfair to blame foreign investors for reducing supply across the property market and inflating prices because they’re bound by strict rules under the Foreign Investment Review Board (FIRB).

Contrary to popular belief, non-Australians can only buy a residential property if it’s a new building or vacant lot and can only purchase existing dwellings if they commit to a large renovation that will increase housing supply.

The FIRB, which assesses foreign buyers’ properties in Australia, also charges an application fee as well as Foreign Citizenship stamp duty for international investors.

Finally, foreign buyers must complete construction on vacant land within four years of their application being approved to prevent land banking.

“Once new dwellings are built or purchased, they may be rented out, sold, or retained for the foreign investor’s own use,” FIRB stated on its website.

As a result, Mr Levoune said the idea foreign investors are taking away housing opportunities from locals is unfair and inaccurate as there are rules in place to prevent such a situation.

According to residential real estate data from FIRB, 4327 foreign investment proposals were approved between 2020 and 2021, followed by 5433 between 2021 and 2022.

Meanwhile, 3196 applications have been approved for residential purposes so far this year.

Since 2020, foreign investors have paid $17.6 billion to secure a property on Australian shores, with investors mostly coming from China, Hong Kong, Vietnam, the United Kingdom and Singapore.

“The idea behind foreign investors is obviously (FIRB) wants to deter them from buying established homes so they can build new properties or buy new properties,” Mr Levoune said.

“Obviously that creates employment, it creates job opportunities and it helps with the stock in the market.

“So the more foreign investors come the better – but that’s only under the assumption that they’re going to obviously rent out the property after.”

The entrepreneur, who boasts more than 38,000 followers on LinkedIn, also posed the question: “If we did stop welcoming foreign investors, is there someone else in Australia who will have enough money to pick up the slack?”

“If the answer is no, then we’re reducing supply even further for a population that’s growing faster than ever,” he said.

Mr Levoune reflected on the 2021 census data for his final argument, explaining that there were more vacant homes on census night than foreign investors purchasing properties for residential investment.

“70 per cent (of people) had reasonable scenarios (as to why they weren’t home), while 20 per cent of residences were holiday homes,” he said.

“Then there’s five to ten per cent that are unaccounted for which is about 100,000 homes. When you have only a few thousand (foreign investors) buying a dwelling a year compared to this figure, that’s not a lot.”

A ‘multifaceted’ problem

While foreign investors can have a positive impact on boosting Australia’s rental supply, Proptrack senior economist Paul Ryan told news.com.au this group will only form part of the solution.

Mr Ryan noted international buyer numbers are yet to reach pre-pandemic levels, with high-density projects like apartment block developments struggling to take off due to the lack of investor pre-sales.

Because of this lack of interest, Mr Ryan said lenders are reluctant to loan money towards developments as they’re unsure if the interest in such developments is enough to make it worthwhile.

“I think there’s a number of ways we can (boost supply) but something isn’t working at the moment where it’s hard for developers to get the confidence that they’re going to be able to sell apartments,” he said.

Mr Ryan did agree that in the long term more homes would need to be built to keep up with population growth however acknowledged changes to restrictions on zoning and planning would need to be considered to build in areas people want to live, such as suburbs close to the city.

He also added a pipeline of developers would need to be established to build more homes as currently workers in the industry are “expensive and scarce” and more essential-skilled tradies will be required in the future.

“I think the responsibility is on everyone in a co-ordinated way (to overcome this rental crisis),” Mr Ryan said.

“And I think there is a role here for governments to co-ordinate all the kind of the facets here.”

He explained developers, planning authorities, all levels of government, tenants and landlords all needed to be involved in the solution.

“The benefits that will hopefully come from this rental crisis is this recognition that we need more supply and the bad news is that we can’t add supply in the short term,” Mr Ryan concluded.

“But if that means that we do get that co-ordination and we work on better pathways to develop it … this could be a really good outcome for Australians resulting in cheaper rents and homes in the future.”

Moving forward

While Mr Levoune is passionate about welcoming more foreign investors to Australia, he agreed there are some loose ends the government should tie up to make the process more transparent.

One area of focus is updating the FIRB registry to learn more about how many foreign investors own homes in Australia overall.

“The biggest question from what I read is that data only keeps up to 2015. That’s when they started the fees by the looks of it,” he said.

“But if that is a scenario, that‘s basically saying to us, anyone who bought a property before that is not on this registry. So how many foreign investors are out there?”

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