A parliamentary inquiry into foreign investment in Australian residential property has raised concerns that there is insufficient data available to make informed policy decisions.
In a 119-page report tabled in parliament on Thursday, the House of Representatives Standing Committee on Economics (committee) said data from the Foreign Investment Review Board (FIRB) couldn’t be relied upon to reflect actual purchases by international investors.
“The principal source of data on foreign investment in residential real estate currently comes from FIRB approvals,” the report said.
“However… this information cannot precisely determine the levels of foreign purchases of residential real estate. The Treasury stresses in its submission that ‘care must be exercised when analysing Foreign Investment Review Board approval data because it represents approvals and does not reflect actual purchases’.”
The report noted that “the quality of the currently available data on foreign investment in residential property was a regular topic of discussion in the written submissions to this inquiry and in the evidence given to the committee at public hearings”.
“A consistent theme emerges from this evidence, which is that data needs to be improved to enable better-informed decision making,” the report said.
The report highlighted that sometimes international investors will seek approval, but won’t proceed with a purchase. It also noted that “it is currently difficult to detect instances of non-compliance” with the rules and that “foreign investors who do not seek approval to purchase a property cannot be captured by the current data framework”.
When appearing before the committee on 27 June, Dr Christopher Kent, assistant governor of the RBA said that despite the holes in the data, conclusions could be drawn on international investment activity.
“While incomplete, the FIRB data and the information received through our liaison with developers suggests that most foreign residential purchases are for new, high-density, inner-city properties, as well as properties close to universities.”
Dr Kent also notes that “the properties they purchase tend to be valued well above the national sales price”.
In its submission to the inquiry, Meriton Group noted that the insufficient data and uncertainty around its reliability was problematic from a policy and public perception standpoint.
“There is a lack of publicly available data on foreign investment in residential real estate, which leads to speculative assumptions around its effect, and potentially leads to poorly informed policy changes,” the Meriton Group submission said.