Sydneysiders blame foreign investors for high housing prices – survey
The following opinion piece features a contribution by Alexandra Wong from the Institute of Culture and Society was first published (opens in a new window) in The Conversation.
Sydneysiders are concerned that foreign investors, and particularly Chinese real estate investors, are pushing up housing prices, according to survey findings published this month. A majority believed foreign investors should not be allowed to buy residential real estate in Sydney.
The federal budget was the government's latest attempt at navigating a policy solution that supports its pro-foreign investment position while responding to public concern about housing affordability in Australian cities.
China's government is also searching for a policy solution to restrict the large amount of capital that's flowing out of the country. But the Chinese crackdown "doesn't appear to be working".
We surveyed almost 900 Sydneysiders to investigate their views on foreign real estate investment. The effectiveness of government regulations on foreign investment and investors was a major concern for respondents.
Views on government regulations
The survey obtained the views of people aged over 18 living in the Greater Sydney region. They were asked about housing affordability, foreign investment, the drivers of Sydney housing prices, and perceptions of Chinese investors specifically.
Support for the government's regulation of foreign investment in housing was weak. Only 17% of respondents thought it was effective.
Almost 56% of participants believed foreign investors should not be allowed to buy residential real estate in Sydney. Only 18% believed this should be permitted.
More than 63% of participants disagreed that the "government should encourage more foreign investment in greater Sydney's housing market". Only 12% of participants agreed with this.
These views stand in stark contrast to the government's geopolitical support for foreign investment in Australia.
Views on foreign investors
There is little fine-grained data about the impacts of foreign capital and investors on specific neighbourhoods and developments in Australian cities. Therefore, we did not set out to compare public attitudes against the limited empirical evidence on the effects of foreign real estate investment in Sydney.
What's significant about the survey results is that Sydneysiders have strong views on foreign investment, despite the absence of reliable evidence. Participants' concerns about foreign investors and investment were consistent with their concerns about the government's foreign investment rules.
Around 63% of Sydneysiders identified the Chinese as the heavyweights of foreign investment. This is likely to be accurate, given the concentration of Chinese investment in Sydney and Melbourne.
When presented with the statement "I welcome Chinese foreign investors buying properties in my suburb", more than 48% of participants disagreed.
Other studies, however, have shown the potential for public confusion between domestic Australian-Chinese and international Chinese buyers.
Views on the drivers of housing prices
Respondents were asked to choose up to three drivers of house prices based on their understanding of Sydney's housing market. By far the most commonly nominated driver of house prices (64% of respondents) was foreign investors buying housing.
Roughly one in three survey participants saw low interest rates (37% of respondents) and domestic home owners (32%) and investors (32%) as the drivers of higher housing prices. Local housing analysts generally agree with this.
But more than three in four participants (78%) agreed with the statement:
Foreign investment is driving up housing prices in greater Sydney.
When framed inversely, as "Foreign investment has no impact or very small impact on greater Sydney's housing market", more than two-thirds of participants (68%) disagreed with the statement.
Only 6% of our participants disagreed that foreign investment was increasing real estate prices. Around 11% agreed that foreign investment had no or minimal impact.
Views on housing supply and affordability
We expected people to report that foreign people and capital are driving up housing prices and making it more difficult for Australians to compete in the housing market. But we were surprised by the findings about Sydneysiders' views on foreign capital and housing supply.
A strong message from the real estate and property development industries is that foreign investment increases housing supply, which in turn puts downward pressure on prices.
Politicians and lobby groups argue this will help improve housing affordability in major Australian cities. But many housing analysts argue that this supply solution does not stack up for purchases made by either foreign or domestic investors.
It seems that Sydneysiders don't accept the real estate industry message about foreign investors increasing housing supply, and therefore helping to ease housing affordability pressures.
When asked if "Foreign investment can help increase housing supply in greater Sydney", 48% of participants disagreed with the statement. Another 25% "neither disagreed or agreed".
An unresolved policy dilemma
The government's dilemma is how to manage foreign investment alongside an increasing housing affordability problem in major Australian cities.
This month's federal budget included a crackdown on foreign investors, but the government still supports foreign real estate investment.
Our survey results support other studies that suggest this pro-foreign investment stance must be accompanied by strategies to protect intercultural community relations. This must happen alongside efforts to improve housing affordability.
1 June 2017
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