Increased measures are being introduced at both state and federal levels in a bid to quell offshore investor interest in Australian residential property. What’s been the impact as these regulatory clamps come into effect?
When July 1 rolled around, both Victoria and NSW – home to the two hottest property markets in the country – increased the tax on foreign purchases of residential property to 7 per cent and 8 per cent, respectively (up from 3 per cent and 4 per cent). In Queensland a 3 per cent tax is due to start on October 1.
In its May budget, the federal government announced a vacancy tax on properties that are left empty for six months or more in a year – another measure aimed at foreign buyers, encouraging them to rent out their investment if they aren’t planning on occupying it for an extended period.
The government has also taken steps to limit the type of property foreign buyers can purchase, channeling offshore interest towards new builds.
With a substantial difference in the cost of purchasing a property in Australia depending on what state you’re in, offshore investors’ may become influenced by the cost of transacting when they are making a decision on where and what to buy.
Interestingly, recent research reported by The Australian showed offshore investment in Sydney commercial property totaled US$5.7 billion last financial year, placing our largest city seventh on a list of global cities for foreign investment – beating Los Angeles, Hong Kong and San Francisco.
As recent as last week, The Australian Financial Review reported that several big developers in Australia are now offering stamp duty discounts on off-the-plan apartments in a bid to attract more foreign buyers.
The real estate industry will no doubt watch keenly as the markets adjust to this increased regulation.