“Greedy” state governments have gone “too far” in their attempt to improve housing affordability by increasing taxes for foreign investors, a property agency has claimed, adding its voice to the protest surrounding the controversial budget announcements.
iBuyNew CEO Mark Mendel said the tax hikes announced by the NSW, Victorian and Queensland governments could backfire if foreign investors take their business elsewhere.
“Foreigners buying property in Australia should be paying some tax but the measures that have been announced by three state governments are over the top and could prove counter-productive for the domestic economy,” Mendel said.
Earlier this week, NSW Treasurer Gladys Berejiklian announced foreign property investors in NSW will soon face a 4% stamps duty surcharge and a 0.75% land tax surcharge on residential property purchased and owned in the state.
Queensland has also announced a 3% surcharge while Victoria will increase its existing stamp duty surcharge from 3% to 7% and a land tax surcharge for absentee owners from 0.5% to 1.5%.
Mendel said iBuyNew, which specialises in off-the-plan apartment and townhouse sales, would not see much impact in the Victorian market because off-the-plan sales do not attract much stamp duty.
“But in NSW and Queensland buyers pay full stamp duty for off-the-plan purchases so it will make it more expensive to buy in those states than in Victoria,” he said.
“With other states likely to follow suit, what will be the impact on foreign buyers? The roll on effect could be an economic disaster for Australia with fewer international students, slower population growth and higher unemployment.”
Speaking at the Australian Financial Review
’s Infrastructure Conference yesterday, Berajaklian, said it would not have an impact on the “inelastic” market and will support broader growth.
“Most commentators would argue that it’s a very inelastic market, so those who were going to make those investments are likely to make those investments anyway,” she said.
“We don’t feel in any way we have compromised the property market in New South Wales. What it will do is allow us to support revenue growth; it wasn’t by accident that we announced [a lowering of business taxes], whilst we’re proposing a tax increase on foreign investors, who are likely to continue their decision-making irrespective of that surcharge.
“I guess it’s a very strong message to say: ‘if there’s a toss-up between do we support local businesses and how else can we generate revenue in a sustainable way for the future’, we need to make those decisions.”