Foreign purchasers are buying as much as 40 per cent of all new apartments in Melbourne, with new figures showing a surge in a tax raised from offshore investment.
Official data, released to The Age under freedom of information legislation, reveals that a tax on foreign buyers of residential property, introduced in mid-2015, has become a significant money-spinner for the Andrews government, with revenue almost doubling in a year.
However, while the tax now generates substantial revenue of more than $133 million, it is not specifically itemised in state budget papers.
Property industry insiders and analysts believe this is because of the political sensitivity around foreign ownership and declining housing affordability.
The figures come as a separate analysis by leading property advisory firm Charter Keck Cramer found about four out of 10 of Melbourne's new apartment purchases are to offshore buyers.
"It's no coincidence we are seeing peak levels of development activity across Sydney and Melbourne coincide with a rising participation of foreign developers and purchasers," said Charter Keck Kramer's national executive director Robert Papaleo.
The development surge is a boost to local construction industry and government coffers but it is contributing to growing concerns around housing affordability, pressures on infrastructure and services from unprecedented population growth.
It's also transforming the city skyline, which is becoming dominated by overseas-funded developments.
Among the towers under construction are Australia 108, a giant residential building being built in Southbank by a Singaporean developer and the 92-level Aurora which Malaysian interests are putting up in the CBD.
A Chinese developer is building Swanston Central on the edge of the central city, which will have more than 1000 apartments.
The extent to which international housing investment is contributing to the current housing affordability crisis is debatable, with inadequate data a problem.
But the figures do coincide with census figures that show home-ownership falling to levels not seen since the 1950s.
Melbourne and Sydney are what's known among some economists and geographers as a "hedge cities", places where cashed up foreign investors (mostly Chinese in Australia's case but Americans, Russians and others elsewhere in the world) park excess wealth.
"Globally, we see that housing is now being seen as an asset class attractive to increasingly mobile capital," said Mr Papaleo.
"Australia has been, in some respects, the path of least resistance to international capital seeking to invest in real estate."
But unlike other international cities targeted by foreign investors - notably Vancouver and London - Australian foreign investment rules limit overseas purchasers to new housing (with some exceptions).
So any impact on housing prices is likely to be in new housing, apartments in particular.
Foreign Investment Review Board data indicates the overwhelming amount of foreign investment in Australia goes into NSW and Victoria. Much of it is from China and south-east Asia.
A December 2016 Treasury paper found the effect on prices was small.
Research by Griffith University academic economists estimated that a quarter of the price growth in Melbourne and Sydney, between 2004 to 2014, was due to foreign investment.
Professor Peter Phibbs, head of urban and regional planning and policy at University of Sydney, said foreign investment was becoming more significant and having some impact on affordability.
But tax policy was the big problem. Generous tax breaks from negative gearing and on capital gains were "like fuel on the fire" driving property prices higher.
In Victoria, the Foreign Purchaser Additional Duty (FPAD) took effect in mid-2015 and applies from when the contract is signed.
The number of transactions caught by the tax rose 44 per cent in 2016/17 to nearly 4000. Part of that increase is explained by a lag in the tax taking effect but strong demand is also a big driver.
While the tax is already a healthy revenue-raiser in Victoria, analysts expect it to raise even more in the coming years after its rate was more than doubled and more transactions are captured by it.
In NSW, a similar tax was levied on 2663 foreign purchasers until April, its first 10 months of operation, government data released to Fairfax Media shows.
Slightly more than 77 per cent of buyers in NSW were from China. There is no comparable data for Victoria.
Professor Phibbs said the investment was changing inner and central Melbourne in other ways, with "canyons" of large towers detracting from a city that had revived itself in recent decades and become a magnet for tourists.
"As a planner I ask, are we making good places to live? I think in some parts of Melbourne there's a question mark."
Along with education, investment in property is seen as pathway to residency by some foreign investors.
It is one of the factors contributing to a population boom that, on current trends, would see Melbourne more than double in size by mid-century.
It highlighted the state government's growing reliance on population and property as an economic and budget strategy, and the mounting public concern that the city's infrastructure and services were not keeping pace with the growth.
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The story Foreign buyers pay for 40% of new Melbourne apartments first appeared on The Age.