How to compete with cashed up foreign investors
Foreign buyers are becoming an increasingly big problem in the Australian property market – and one way to cope with it is to enforce a substantial surcharge on international buyers.
This is what many state governments around Australia are considering, in an effort to even the playing field for local buyers and ensure international buyers don’t push Australian property prices up.
The Victorian state government is already doing it, with the announcement that stamp duty for foreign buyers will increase from 3% to 7%, for all property bought after 1 July 2016.
Mark Mendel, CEO of iBuyNew, says the NSW government should follow suit with similar harsh tactics, by charging foreigners buying property in the state a 3.0% surcharge rather than the suggested 1.5%.
He’s in favour of the potential 3% surcharge on foreign investors, which has been mooted as a possible measure in the June 21 New South Wales state budget, as he says it will help to improve housing affordability.
“Foreigners buying property in Australia should be paying a tax but the 1.5% surcharge that has been flagged isn’t high enough,” Mendel says.
“They should be slugged with a 3% surcharge instead. By charging foreigners a higher surcharge, this gives the ordinary Australian property buyers a fair go at purchasing their own property. A higher surcharge will also allow foreigners to help contribute additionally to communities in the areas where the tax is collected.”
Even though the surcharge could impact property sales, he believes it is a “good move” that could help ordinary Australians to get into the property market.
“I believe it’s a fair proposition for foreign buyers of real estate, who enjoythe benefits of capital growth from the property they purchase, to help contribute to the infrastructure and liveability of the communities they are investing in via this tax proposal.”
Mendel says the surcharges need to be high enough to have an impact, pointing out that when the Victorian government introduced a 3% stamp duty charge and a 0.5% land tax levy for foreigners in 2015, it failed to have an impact.
“There hasn’t been a noticeable impact on foreign demand for Victorian real estate since then and in fact … there has continued to be a steady stream of foreign interest in Australian real estate, despite these charges,” he says.