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Increased surcharges and taxes to foreign borrowers are counter-productive and put housing supply in Australia’s major capital cities at significant risk, the Property Council of Australia has warned.
The New South Wales government last week announced that foreigners buying residential property will be hit with a 4.0 per cent stamp surcharge, beginning this week, and be required to pay an additional 0.75 per cent land tax from 2017.
It came after the Victorian government said it will increase its stamp duty surcharge from 3.0 per cent to 7.0 per cent and raise the land tax surcharge for absentee owners from 0.5 per cent to 1.5 per cent.
In Queensland, the state government announced foreign buyers will incur an additional 3.0 per cent surcharge.
The Property Council’s chief of policy and housing Glenn Byres slammed the announcements made by Australia’s east coast state governments, saying they won’t improve the obstacles currently facing the property market.
“We’ve now got a race to the bottom on populist taxes that do nothing to fix housing supply or improve affordability,” Mr Byres said.
“Let’s call this for what it is – a cash grab from states prepared to play to the crowd on foreign investment and put at risk Australia’s reputation on the global stage.
“Mike Baird is channelling Bob Carr and the failed vendor duty – introducing a bad tax at a bad time and inflicting damage on the housing construction industry.”
Mr Byres said the changes will backfire and have a negative effect on the market.
“As the prime minister says, if you want less of something, you tax it more,” he said.
“You also give up any pretence of being a global city if you increase taxes on foreign investment.”
Mr Byres said foreign investors help to support the property market and the broader Australian economy.
“Offshore investors account for 15-20 per cent of pre-sales in our capital cities and help switch projects from concept to construction. This helps maintain a supply pipeline crucial to close the demand gap, lifts affordability and every new home constructed supports up to 40 jobs,” he said.
“If the states want to boost affordability, they would take responsibility for fixing their dysfunctional planning systems that add to the cost of new homes through red tape.
“They would also remove stamp duty, the biggest barrier to home ownership, which adds up to $60,000 over the life of an average mortgage.”