State governments along Australia’s eastern seaboard may have unwittingly joined forces to give a leg-up to property markets in other areas of the country.
In recent weeks Victoria, New South Wales and Queensland have all introduced some form of additional tax costs for foreign buyers of residential real estate by imposing higher rates of stamp duty and land tax.
All three governments announced the measures with a common message that the tax surcharges would provide additional revenue and would not impact demand for Australian real estate among foreign buyers.
But Gavin Norris, head of Australia for Juwai.com, an online portal that markets real estate to Chinese buyers, said the three states do run the risk of making other areas of Australia more popular to overseas buyers.
“The east coast states do run the risk that buyers will move to locations with more affordable property and less red tape, like South Australia, Tasmania and Western Australia,” Norris told Your Investment Property.
“This is certainly a great opportunity for agents and developers in those other states to more proactively make the case that their markets offer the same lifestyle at a better price,” he said.
Norris also said the moves may make other international market more popular for foreign buyers, such as the United States where foreign buyers face no additional charges.
Norris, who has previously criticised the moves, said Juwai is keeping a close eye on what impact the tax changes have, however it may be up to a year before the full effect is seen.
“It’s too early to see any trend in the number of buyer enquiries that come into Juwai.com that we on-send to agents and developers. We have been watching Victoria, in particular, which was the first mover with the stamp duty, and we haven’t seen an impact yet,” he told Your Investment Property.
“Chinese consumers often come to Juwai.com about nine to 12 months prior to actually investing, and they use it to educate themselves.”
While Norris has raised questions over the claims that the charges won’t impact foreign demand, Rich Harvey, chief executive officer of propertybuyer.com.au, has questioned the amount of revenue the governments believe they will generate from the surcharges.
In particular Harvey raised doubts about the claim from NSW Treasurer Gladys Berejiklian that NSW would see an extra $1 billion in tax revenue over four years from the surcharges.
“The question in my mind is why didn’t they bring it in earlier in the boom, rather than at the end of the boom? It’s a classic case of the government chasing the tail end of things and moving too late to really benefit,” Harvey told Your Investment Property.
“If [that $1 billion is] based on past projections there’s no way they’ll get to that number. If you look at the forward estimates of demand overseas buyers will have for property then they’re not going to get that.”
Like Norris, Harvey also said it’s too early to judge the real impact of the extra changes; however he did say foreign investors often received unwarranted negative attention from policy makers.
“They are used as a scapegoat and they are an easy target," he said
“It’s an issue that’s always going to be up as an easy target and as much as you’d like any debate to move beyond a certain point I think it’s always going to be like this because there’s still some xenophobia and still a perception that foreigners are taking too much of our land.”
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