New South Wales will follow the lead of Victoria and Queensland, with the state’s Treasurer Gladys Berejiklia revealing the forthcoming budget will include taxes for foreign property investors.
Under the new measure, foreign investors will be slugged with a 4% stamp duty surcharge on residential real estate purchases, in addition to a 0.75% land tax.
But the move has infuriated industry bodies and real estate agents, with the Property council of Australia fearing housing supply in the major capital cities will be put at risk by “counter-productive taxes on foreign investment.”
"We've now got a race to the bottom on populist taxes that do nothing to fix housing supply or improve affordability,” Glenn Byres, the Property Council's Chief of Policy and Housing says.
"Let's call this for what it is - a cash grab from states prepared to play to the crowd on foreign investment and put at risk Australia’s reputation on the global stage.”
But Ms Berejiklia is confident the changes will not halt demand for NSW property, and will instead fund essential services across the state, while drawing in an additional $1 billion over four years.
“These new measures will ensure NSW’s property market continues to be an attractive destination for international investors while making sure that we are able to fund vital services into the future,” Ms Berejiklian said.
The Treasurer also announced that foreign investors will no longer be entitled to the 12 month deferral for the payment of stamp duty for off-the-plan purchases of residential property, and foreign investors will not be provided with a tax-free threshold for the land tax surcharge.
In Victoria, a 7% foreign investor surcharge on residential stamp duty and 1.5% surcharge on some land tax will begin from July.
“The Victorian experience has demonstrated that the measures have not had an adverse impact on the property market,” Ms Berejiklian said.
However, Victoria’s leading agents, including CBRE”s Andrew Leoncelli, were highly critical of the move, fearing foreign investors will take their money elsewhere.
"Offshore investors account for about 15 - 20 per cent of pre-sales in our capital cities and help switch projects from concept to construction,” Mr Byres explains.
"This helps maintain a supply pipeline crucial to close the demand gap, lifts affordability and every new home constructed supports up to 40 jobs. If the states want to boost affordability, they would take responsibility for fixing their dysfunctional planning systems that add to the cost of new homes through red tape. They would also remove stamp duty, the biggest barrier to home ownership, which adds up to $60,000 over the life of an average mortgage.”
The changes are slated to commence on budget day on June 21, with the .75% land tax surcharge to begin in 2017.
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