One of the chief recipients of blame for this phenomenon is overseas buyers, particularly the Chinese. However, an article about a historic federation home slated for demolition in the Melbourne suburb of Kew has highlighted the fact that one of the causes of demolitions is actually a measure designed to restrict foreign ownership.
Current foreign investment rules only allow foreign investors to buy residential property if they intend to construct a new dwelling on the land. They cannot buy property just to live in, or rent out, the existing dwelling. This distinction is designed to increase the housing stock and stimulate the building industry but, as with so many government regulations, this one is having unintended consequences.
Kew locals have perceptively pointed out that the restriction is one reason for the spate of demolitions of historic homes in their neighbourhood. The particular house in this case was recently renovated and has a tennis court and swimming pool, so would seemingly be very liveable for the new overseas owners, who bought it for $9.4 million.
However retaining the historic home is not an option for the owners when FIRB rules state that “the existing dwelling must be demolished and continuous substantial construction of the new dwellings must commence within 24 months”. Further, if the owners fail to comply, FIRB will take a dim view of any application for residency they might subsequently make.
Who knows whether these owners might demolish anyway, but next time you see a beautiful historic home being demolished, please consider the real culprit might be the federal government, not the overseas owners.