Foreign investment updates
Offshore investment plays a small but crucial role in stimulating new housing supply.
As at 31 March, over 3,600 residential property applications had been finalised by the ATO under the new regime – 60 percent of which were applications to purchase new dwellings. Of these, 39 percent were from Victoria, 32 percent from NSW and 19 percent from Queensland.
The national Residential Land Register will commence collecting data on July 1, and we are continuing to call for greater transparency in the publication of data on foreign investment in Australian property. This includes more information on the impact of foreign investment in employment generating property such as commercial office, retail or industrial.
In contrast to the more sensible approach taken by the Commonwealth Government, the Victorian Government has used its Budget to announce increases to the land tax and stamp duty surcharges for foreign investors.
The legislation currently before the Parliament proposes to increase the land tax surcharge applicable to absentee owners from 0.5 percent to 1.5 percent from the 2017 land tax year. It also proposes to increases the stamp duty surcharge for foreign buyers of residential property from 3 percent to 7 percent.
These taxes are a backwards step for Victoria, and present a very real threat to economic growth. They undermine confidence in the property market, and Victoria’s position as an attractive destination for investment.
Because these surcharges extend beyond residential property, dozens of transactions across the state are being reconsidered or cancelled.
The Property Council has met with the Treasurer on a number of occasions to inform him of our opposition to the charges, as well as outline a range of operational issues. These are detailed in the submission made by the Victorian Division.
There are now also worrying reports that the NSW Government is considering similar tax surcharges as part of the State Budget later in June.
The Property Council’s NSW Division Executive Director Jane Fitzgerald has labelled it a ‘gravely risky strategy‘ and there is no doubt it will do nothing to improve housing affordability in NSW.
We will continue to call these taxes what they are – opportunistic revenue raising that will further stifle much needed supply of housing in Australia’s fastest growing cities.