We keep taxing the capital we need to build the homes we don’t have

Australia is driving away the investment it needs to solve the housing crisis, writes Hotspotting Managing Director Tim Graham.

For much of my career, I had a front-row seat to one of the least understood forms of global migration.

Not the migration of people.

The migration of money.

I spent years working across at least 18 countries, helping developers present projects internationally and sitting opposite high-net-worth families deciding where to place the wealth they had spent a lifetime creating.

Their biggest question was rarely: Where can I make the highest return?

It was: Where will my money be safe?

For families living in countries affected by corruption, political instability or weak institutions, Australia offered something incredibly valuable: trust.

Our legal system, political stability, economy, education system and property rights made Australia one of the world’s most attractive destinations for capital.

And critically, we largely directed foreign property investment towards new housing.

Foreign buyers were generally restricted from purchasing established homes, meaning much of their money flowed into new apartments, vacant land and developments that increased supply.

At the peak in 2015–16, foreign residential real-estate approvals reached $72.4 billion. The following year, around 88 per cent of approved value related to new dwellings, vacant land or redevelopment.

This wasn’t simply overseas billionaires outbidding Australian families at suburban auctions.

A lot of that capital was funding homes that had not yet been built.

That matters because development relies on capital and presales. Developers need purchasers before banks will finance construction. Foreign buyers, particularly through the apartment boom of the mid-2010s, helped make many projects viable.

Then Australia progressively made itself harder and more expensive to invest in.

Foreign-buyer taxes increased. Lending to non-residents tightened.

Vacancy charges were introduced. Investment migration programs were wound back.

Chinese capital controls compounded the decline.

Capital problem is made harder

There were legitimate reasons behind many of those decisions.

But capital does not stop being capital because one country makes investment harder.

It goes somewhere else.

Today, countries such as the UAE and the United States actively use residency and investment programs to compete for internationally mobile wealth.

Australia, meanwhile, has increasingly moved in the opposite direction.

I returned permanently in 2019 after years overseas, and sometimes you have to leave Australia and return again to truly appreciate the opportunities and safety that this country offers.

I had worked in places where families genuinely did not trust their governments to protect their assets.

Australia is nowhere near that.

But what concerns me is the direction we’re heading.

Foreign investors were the easy target first.

Increasingly, Australian investors are being treated the same way.

And this is happening while Australia faces a housing shortage that should make attracting productive capital a national priority.

We are targeting 1.2 million new homes over five years, yet forecasts suggest we could fall hundreds of thousands short.

Rental markets remain extraordinarily tight.

And despite the rhetoric around landlords, the overwhelming majority of Australian renters rely on private investors for their housing.

That creates an obvious contradiction.

People supplying capital are not the problem

We need enormous amounts of private capital to build and provide housing, yet we increasingly treat the people supplying that capital as the problem.

The latest federal tax reforms are another example.

I actually support the principle of directing negative gearing towards new housing from July 2027.

If government is going to incentivise investment, there is a strong argument for rewarding investment that creates another dwelling.

That is essentially what Australia once did with foreign purchasers.

But investors do not look at one tax in isolation.

They look at stamp duty, land tax, finance costs, rental regulation, planning delays, capital gains tax and, perhaps most importantly, whether the rules are likely to change again.

Even Treasury modelling cited by the Grattan Institute suggests the latest tax changes could result in around 35,000 fewer homes being built over the next decade, although Grattan argues other supply measures will offset that reduction.

At minimum, it should make us ask whether our policies are all pulling in the same direction.

Housing is one interconnected system.

First-home buyers, renters, investors, developers and lenders do not operate independently.

Make investment less attractive and investors change behaviour.

Reduce investor demand for new projects and development feasibility changes.

Reduce rental investment and tenants feel the consequences.

Increase policy uncertainty and investors demand a higher return before committing their money.

Tim Graham with Ahron Young at the Ticker Studio

Capital is not sentimental.

That is one of the clearest lessons I learnt working internationally.

It goes where it is wanted, where risk is rewarded and where the rules are predictable and reliable.

For too long, governments have reached for sticks when housing desperately needs carrots.

Encourage foreign capital when it creates genuinely additional housing.

Give Australian investors durable incentives to add to Australia’s rooflines.

Reward long-term rental supply.

Reduce planning delays.

Create tax settings that improve development feasibility.

And give investors enough certainty to make a twenty-year decision without wondering whether the rules will be rewritten every election cycle.

We also need to stop pretending every property investor is an institutional speculator.

Often it is a nurse, teacher, tradie or small-business owner with one investment property helping provide the rental accommodation Australians depend on.

Most importantly, we need to stop talking about private investment as though housing policy would somehow function better without it.

It won’t.

The first sign that a country is losing capital is not billions of dollars suddenly disappearing offshore.

It is doubt.

It is an Australian investor sitting at home, seeing opportunities advertised to them on Meta in countries like Dubai or elsewhere, and asking a question that once would have seemed ridiculous:

Would my money be more welcome somewhere else?

For decades, Australia’s proposition to capital was simple:

Bring it here. Play by our rules. Invest productively. Help us grow.

We need a modern version of that proposition again.

Because Australia cannot choose between housing supply and private investment.

We need the investment to build the housing.