Foreign buyers of real estate in the Australian state of New South Wales (NSW), of which Sydney is the capital city, will soon have to pay an extra 4% in stamp duty for residential properties, as well as a 0.75% annual land tax in 2017.
The rate hikes were announced by NSW Treasurer Gladys Berejiklian yesterday. Foreign buyers of property in NSW will have to pay a 4% stamp duty surcharge from next week, and an extra 0.75% land tax from January 2017. The changes are expected to be announced in next week’s NSW budget.
The changes mean that a buyer from overseas purchasing a house at the cost of the Sydney median house price, $995,804 (RM2.99 million), will pay $41,917.72 in stamp duty, a $1612 (RM4,900) increase to what local buyers would pay. The new stamp duty rate will apply to all foreign owners of residential real estate, not just those entering the market after the measures are implemented.
However, the increase is not expected to affect the property market in NSW or Australia as a whole. “If you asked most economists, they would say people who are going to invest in these houses who are foreign investors are going to do it anyway,” said Berejiklian. A local brokerage analyst agreed that the property tax hike would not have any impact on Malaysian property developers with projects in Australia. This is due to the fact that most Malaysian property developers’ projects are located in Melbourne in Victoria state, which has already imposed a tax on foreign buyers.
Victoria, Australia’s most densely populated state, is raising its tax on foreign purchases of residential property to 7% effective July 1, up from the existing 3% implemented a year ago in July 2015. In addition, Victoria will also triple the surcharge on “absentee landholders” to 1.5% from 0.5%, effective from the 2017 land tax year. The Victorian experience has demonstrated such measures have not had negative impact the property market.
In view of this, the 4% stamp duty surcharge in NSW is not expected to curb foreign buying, considering that foreigners are already paying all kinds of taxes on their Australian property purchases, remarked another property analyst, who noted that Singapore is charging a 17% to 18% tax on foreign buyers.
Nevertheless, a bank-based analyst opined that with the new tax scheme, property developers that plan to venture into the Sydney property market may have to rethink their strategy. “Sydney property prices have been on the high side and the introduction of new taxes is aimed at curbing foreigners from buying properties there for investment,” the analyst said.