A campaign is mounting in Western Australia to block the introduction of a tax on foreign buyers of residential real estate, while at the same time New Zealand has banned non-citizens from purchasing established homes.
Western Australia’s opposition has moved to vote against the introduction of a foreign buyer tax of 7 per cent, due to take effect in January 2019.
The Labor state government increased its proposed impost from 4 per cent to 7 per cent in its budget earlier this year, expecting the move would bring in revenue of $123 million from 2018-19 to 2021-22.
But the Liberal-National opposition announced this week it aimed to block the legislation, citing a potential detrimental effect on a possible property market recovery in Western Australia.
Real estate pundits in WA have maintained that the market is close to the bottom of its prolonged cyclical downturn for more than 24 months, however, economic indicators from the state’s biggest industry sectors are showing early signs of recovery, boosting hopes that property will soon follow.
Urban Development Institute of Australia WA chief executive Allison Hailes said while the new tax would hurt the residential recovery, it was also contradictory to the state government’s aims of increasing the number of foreign students studying in WA.
“On the one hand we have the government announcing incentives for more international students to study here, which is a fantastic initiative, and on the other hand they are planning to introduce a new tax for those same students and their family, if they choose to purchase a property to live in while they are here,” Ms Hailes said.
“It just doesn’t make sense. The government needs to review this policy approach and ensure it supports its broader objectives of growth and job creation, rather than looking for a small, short-term revenue gain.”
Ms Hailes said the current lack of a surcharge on foreign buyers in the residential sector gave WA a competitive advantage over other states, with only Tasmania and the Northern Territory not imposing a tax on offshore property purchasers.
“With the economy as it is, we think it is imperative that the government rethinks this flawed policy and instead works with industry to ensure that the property development sector is supported to build a prosperous future for WA,” Ms Hailes said.
The most recent data from the Foreign Investment Review Board indicated that there was $370 million worth of established property sold to foreign buyers in 2015-16.
Meanwhile, New Zealand’s Parliament has blocked non-resident foreigners from purchasing established houses, in a move to moderate rapid price growth in key housing markets.
New Zealand is ranked 6th among foreign markets most attractive to Chinese buyers, trailing the United States, Australia, Thailand, Canada and the United Kingdomm according to data collated by China-headquartered real estate portal Juwai.com.
Median house prices in NZ’s capital, Auckland, have almost doubled in the last decade, while nationwide home values have risen by more than 60 per cent over the past 10 years.
Data from Statistics New Zealand indicated around 3 per cent of home transfers in the country in the June quarter were to people without NZ citizenship or resident visas.
At the time of the release of that data, Juwai.com chief executive Carrie Law argued that it was not foreign buyers who were pushing up house prices in NZ.
“Seventy-five per cent of our buyers in New Zealand tell us they are purchasing for their own use,” Ms Law said.
“Foreign buyers account for about one tenth the number of transactions as local investors.
“If anyone is driving up prices, it’s your rich dad and uncle, not rich Chinese.”