Imposing higher taxes on foreign investors purchasing property in New South Wales will make it more difficult for first home buyers to get onto the property ladder.
“For domestic investors and first-time buyers, a new tax on foreign buyers could be a challenge. New South Wales right now is building a record number of apartments, and that construction depends to a material degree on foreign off-the-plan sales,” Gavin Norris, head of Australia for Juwai.com, the Chinese international property portal, said.
Under NSW Treasurer, Gladys Berejiklian’s state budget plan, overseas property investors will have to pay more to buy a home. She proposed a 1.5% surcharge for foreigners purchasing a house in the state, citing housing affordability as the reason behind the move.
But deterring foreign investors with an extra tax will not only make affordability harder for first home buyers, Norris said it will have rippling consequences on the broader economy.
“If Chinese buying slows down, it will likely make things harder for first time buyers, for construction workers, and for the education, tourism and retail sectors.
“We have surveyed more than 30,000 Chinese international property buyers, and 59.5% of those who make enquiries on Australian real estate are motivated by education. Foreign students spend $18 billion on education in Australia. So if New South Wales makes investment conditions less favourable for foreign buyers, its education sector stands to lose revenue.”
When the government discourages one buyer, Norris said it loses tens of thousands of dollars in other benefits.
“Foreign investors bring construction jobs, government revenue, retail and services spending, education spending, tourism spending and often ultimately become skilled citizens of Australia who help grow our economy and pay Australian taxes.
“Some buyers undoubtedly could shift their focus to other states, or countries.”
With this new tax, NSW would also have more confiscatory foreign buyer policies than Queensland, New Zealand, the US, the UK or Canada, Norris added.