Foreign buyers try to skirt new stamp duty hikes

By Leith van Onselen

In the wake of yesterday’s data from ANZ showing a sharp drop in foreign residential property sales (see chart above), as well as the hissy fit from “Highrise” Harry Triguboff, The AFR has reported that foreign buyers are attempting to skirt recent stamp duty increases by purchasing “nominated” off-the-plan apartments whose contracts were signed prior to the stamp duty increase:

The Australian Financial Review Rich Lister Jonathan Hallinan, the founder of developer BPM, said a new “secondary market” had emerged to trade off-the-plan contracts signed prior to July 1, the date from which lucrative concessions were removed for investors by the Victorian government.

“The Chinese want to buy nominated contracts, so there is now a market for nominated contracts,” Mr Hallinan said.

“These investors don’t want to have pay the full stamp duty when their friends and family haven’t had to.”

Most developers allow off-the-plan purchasers to nominate a substitute buyer prior to settlement to take over the contract.

According to Victoria’s State Revenue Office: “If there is a nomination under a contract that was entered into before 1 July, 2017, the previous off-the-plan concession would apply to the transfer to the substituted purchaser.”

A search on classifieds website Gumtree revealed that a number of off-the-plan “nomination contracts” for projects, including Aspial’s Australia 108, BPM’s Shadow Play tower and UEM Sunrise’s Aurora development, are all available to be purchased on Gumtree.

“I imagine stamp duty would be between $2000 – $5000 as opposed to full stamp duty on the purchase price which is $29,900,” said one seller in response to a question from a potential buyer.

These types of ‘secondary’ sales will soon run their course. The further we get from the 1 July 2017 increase in stamp duty, the less ‘nominated’ properties will be available in the market. So if foreigners want to purchase off-the-plan in Victoria (or elsewhere where stamp duty has been hiked), they will have to pay up.

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Comments

  1. The Chinese are well practiced at avoiding pesky government regulations at home, and they are transferring these skills to Aus.

    40% of apartments they buy are left empty, and they avoid the tax on this by simply setting a timer for water and lights, to make it look occupied.

    Australia is naive if we think they are going to get them to pay tax. They are smarter than that.

    • So dumb buying apartments when no one else wants them

      China will crash, maybe this week, year, either way, when it does, Australia goes with it, and no one is going to want Chinese apartments, here or there

      • A reason Chinese invest in Australia is to get money out of China. They are hedging their bets.

        It is quite possible that if China crashes, even more of money will flow into a “safe haven” like Aussie property.

      • Yuichi – Chinese demand in Australian property is evaporating as they realise it isn’t a safe haven at all. Sydney prices are dropping and taxes are rising. Who wants to buy in a falling market when other more enticing markets are available in other countries?

      • Lol if it shows the slightest sign of crashing watch how much money comes over to aus.

        Chinese money to australia is evaporating because of chinese restrictions, nothing to do with demand. Open the flood gates and see what happens.

      • @YuchiY
        Not sure that logic stacks up — it’d be like jumping out of the frying pan and into the fire. Added to which, when China crashes capital controls will ‘get real’, except for the connected elites.

    • Chinese skirting laws in China end up in mobile vans – they are far less likely to do it per capita than Australians – where there is literally no punishment at all for corruption.

    • Strange that 20% of property is being sold to foreign buyers, yet only a very small number seem to be paying the foreign buyer’s duty? And if they aren’t paying it (however they manage this) why the claim that this is a deterrent?

      • Exactly Dan! Possibly too many bureaucrats taking “sickies” to find time to realise this anomaly…..they kick the can and pass the buck and rip us off with significant unaccountability.

    • The problem of strong demand for shit is that the shit stock gets replenished, using land that would otherwise be applied for development of good quality stock.

      It is a race to the bottom.

    • That’s how I feel. Heap of unsold units in my neck of the woods. The choices:

      1. Sell to a Chinaman who leaves it unoccupied.
      2. The State Govt buys unsold stock, it becomes Commission housing and the area fills up with deplorables.

      Thanks, I’ll take an absent Chinaman (or woman …. or gender non-specific creature)

  2. Here we are still talking about foreign buyers like they have a unassailable right to purchase Australian property while locals are shafted in enumerable ways. Those pesky locals.

  3. What precludes developers to issue back-dated contracts? I mean sign contracts today with previous dates?