The property lobby has been quick to oppose the NSW Government’s measures targeting foreign buyers. From Domain:
A decision to charge foreign investors buying in NSW the highest fees in the country, in addition to federal budget measures, has been slammed by real estate pundits as a move that “totally defies economic logic” and will make affordability issues worse.
…the measures could actually see affordability issues made worse, explained Sue Jong, chief operations officer of Chinese real estate portal Juwai.
“This policy could decrease foreign investment in NSW new property by as much as 15 per cent,” Ms Jong said.
But while it’s likely to reduce demand, it could also cause a decrease in supply.
“With every misguided new policy proposal, foreign investment will decrease along with new housing construction, housing affordability and construction employment,” Ms Jong said.
“For every unit a foreign buyer purchases, they enable developers to build four more homes for first-time buyers and investors”…
There were concerns foreign investors might consider other states and territories where fees were lower…
Richardson & Wrench Mosman director Robert Simeon… warned many projects would be shelved and prices could decline.
“Developers can’t usually get funding without 75 per cent of apartments being sold off the plan,” he said.
“It totally defies economic logic”…
The changes affecting foreign buyers announced by the NSW Government are as follows:
- Increase the foreign investor surcharge from 4% to 8% on Stamp Duty; and
- Increase the land tax surcharge on foreign investors from 0.75% to 2%, with foreign developers to be exempt.
Both are excellent policies. Not only would they help cool foreign buyer demand, but they would also raise much-needed funds for the Budget to help fund infrastructure, public services and housing measures.
The new 8% stamp duty surcharge is also in addition to the normal stamp duty of up to 7%, meaning foreign investors would be liable to pay up to 14.5% of the total purchase price in taxes. This is comparable to the 15% stamp duty currently charged by Hong Kong, Singapore and the Canadian provinces of British Columbia and Ontario.
The property lobby’s claims that the foreign buyer measures would harm housing affordability don’t pass the sniff test. We know that Sydney and Melbourne are the key magnets for foreign buyers (as well as immigrants) and, not surprisingly, it is these two markets that have experienced exploding price growth:
