Western Australian MP Ian Goodenough has called for a ministerial review into the federal government’s tightening of offshore investment regulations, saying the policy change is having an unintended detrimental impact on property development.
Western Australian MP Ian Goodenough has called for a ministerial review into the federal government’s tightening of offshore investment regulations, saying the policy change is having an unintended detrimental impact on property development.
In a speech to parliament in Canberra earlier this month, Mr Goodenough said changes to the federal government’s Significant Investor Visa (SIV) framework, in effect since July 1 last year, were providing significant challenges for property developers, which had previously sourced large amounts of capital from overseas investors.
The changes were designed to funnel more capital into sectors of the economy that needed it most; for example venture capital, startups, technology and research and development.
But instead of redirecting the funds, the capital has simply dried up.
Mr Goodenough, Liberal member for Moore, said the number of SIV applications had fallen to an average of eight per month, just 6 per cent of what was previously being lodged.
“We were having an average of 128 applications per month and now it’s down to eight, practically within a six-month period,” Mr Goodenough told Business News.
Mr Goodenough said research from the Australia China Business Council WA showed Chinese investors were generally risk-averse and conservative, preferring investment in bricks and mortar property development or companies they could participate in management.
He said a major shortcoming of the policy was that developers were no longer able to source capital from overseas investors for projects, which often helped to stimulate the economy by creating opportunity for new businesses in commercial units at the ground floor of apartment buildings.
“The government introduced the changes because we wanted more active investment that creates employment and has an operational impact on the economy,” Mr Goodenough said.
“The government was also trying to avoid people buying expensive established residential housing, which was an issue in NSW, where several multi-million dollar properties were being bought and that was pushing housing prices up.”
Perth-based developer Devwest Group has had extensive links to China going back for more than 15 years, with around half of the company’s capital for new projects coming from that country.
Director Chad Ferguson said Devwest had a number of commitments from Chinese investors looking to provide capital for the company’s projects, as well as leads on potential investors, but the rule changes prevented any deals from proceeding.
“We make sure that our capital sources are pretty diversified so we’re not relying on one particular type of investor to fund our projects, but we definitely did miss out on investment into our projects as a result of those changes,” Mr Ferguson told Business News.
“We had multiple investors lined up that were either in the process of getting approved under the SIV scheme or basically told us they were going to do it, but after the changes they didn’t proceed.”
Mr Ferguson said he understood the rule changes were made to protect Australian housing markets from price bubbles, but maintained that restricting investment in property development was a step too far.
“What we’ve tried to explain is that if people invest in development, it’s going to add to supply,” he said.
“More supply means less pressure on prices and prices potentially coming down.
“That’s why we couldn’t see the logic of it.
“It’s purely a political thing so they could go out there and say ‘were clamping down on investment in real estate because there is a bubble’ but at the end of the day, if you’re increasing supply, there is no bubble.”
