The new stamp duty and land tax surcharges on foreign investors announced by the Victorian, NSW and Queensland will clearly have an impact. To deny it, as the respective treasurers have done, is simply naive.
The naivety goes further. Offshore buying has a broader impact than just the volume of apartment sales. It has been the catalyst for the recovery in housing construction.
The new taxes are not of the magnitude of the 15 per cent stamp duty surcharge imposed in Singapore and Hong Kong which dramatically cut offshore demand, and have sent house prices into a tail spin.
But they come at a time when foreign investment is being crimped by other factors, including higher Foreign Investment Review Board application fees, lending restrictions on offshore buyers by the Australian banks, Chinese restrictions on private capital outflow, new Australian Taxation Office requirements on withholding tax for foreign sellers, and general concerns about apartment oversupply and, with the Kidman decision, the real level of openness to Chinese investment.
Australia’s largest apartment developer, Meriton’s Harry Triguboff says the NSW surcharges are “bad”. Unequivocally. “The Chinese buyers are already disappearing,” he says.
And on it goes with the usual lineup of property industry self-interested peeps.
I suggest, Robert, that you take a moment to consider this question from the perspective of public policy (and that of your fellow Australians). By taxing foreign investors in this manner, Australian states are enjoying a revenue windfall at zero cost to the domestic population which can be spent on improving services, including those currently overrun by the population growth behind the apartment boom in the first place. Are we supposed to let the buggers flood in, trash the existing population’s living standards through choked infrastructure, then go their own way without paying a dime while land banking their asset? I’m sure that when you think it through you’ll agree that that is pretty bloody stupid.
As for driving Chinese buyers elsewhere, Canada and New Zealand are currently examining similar taxes and I’d be prepared to bet that both will apply them soon enough given the rationale is so very strong.
On the question of withering supply…well…that’s hardly a consideration for today is it:
And increased vacancy taxes are an especially good development that should be dramatically increased as soon as possible to ensure that the new apartment supply remains liquid.
Chinese foreign buyers may well be disappearing but that has little do with these relatively small new taxes. It has lot more to do with local banks and Chinese authorities discovering that the capital flight trade into apartments is roundly dodgy.
If Highrise Harry has exposed his business to a Chinese buyer boom (in the shape of three-quarters of his apartments) then I sympathise but that is not the state’s problem.
