Queensland budget: New foreign
investment tax could exacerbate oversupply
Jun 9, 2016 - Jason Quelch - Property JournalistBrisbane’s apartment oversupply could be exacerbated by a new stamp duty tax for foreign buyers.
Queensland Treasurer Curtis Pitt announced on Thursday foreigners will have to fork out an extra 3 per cent tax on real estate purchases as part of the state government’s new budget measures.
The state’s property leaders have slammed the move and said it could potentially put development on hold and leave more apartments empty.
The Foreign Investment Review Board found Queensland’s foreign buyer market share was 14.2 per cent between 2014-15.
Real Estate Institute of Queensland CEO Antonia Mercorella said the tax had devastating potential.
“This is potentially disastrous news for our apartment market where some estimates have foreign investment at 15 per cent to 20 per cent across Brisbane,” Ms Mercorella said.
“This could mean we might see some developers not go forward with construction if they do not meet the necessary pre-sale numbers,” she said. “Or we could see apartments sitting longer on the market.”
Ms Mercorella said for a non-concessional buyer the 3 per cent surcharge could almost double the $20,000 stamp duty currently paid on a $600,000 property.
“The Gold Coast apartment market also relies on foreign investment levels and this could be a significantly negative impact on the market,” she said.
The Property Council’s Queensland branch mirrored REIQ’s concerns.
Executive director Chris Mountford said the policy would be a shock for industry confidence.
“Our residential development cycle has reached its peak. The Treasurer’s actions are likely to intensify the market’s cooling process, impacting construction work and ultimately jobs over the next 12 months and beyond,” Mr Mountford said.
“Foreign investors enable new residential projects to get off the ground, creating a huge economic benefit for the state and producing new stock that puts downward pressure on rents and keeps housing affordable for Queensland families.”
He said foreign investors could turn their backs on Queensland.
“There are international investors currently weighing up the merits of residential projects in Queensland. If they choose to go elsewhere, so will the government’s revenue.”
Allen Wargent buyers’ agent Pete Wargent, who works with both local and foreign clients, said it could erode Queensland’s competitive advantage.
“It is another hurdle that could deter foreign investors by adding another layer of difficulty,” he said.
“If foreign investors were to leave the market it could impact on development approvals being mothballed and could have an adverse impact on construction and jobs.”
The foreigner surcharge follows the Victorian government’s lead after increasing the tax to 7 per cent in July.
But Queensland-based foreign investment specialists Mi Casa Chairman Brett Raguse said it was an understandable cost of investment.
“It is good the government is getting involved, and if nothing else, hopefully it will ensure the banks and other lenders have more confidence in the market,” Mr Raguse said.
“Tax is tax and no one wants to pay more – but it’s not the end of the world. In fact, it shows strength of confidence in foreign investment.”
Mr Raguse said claims that it would send foreign investors elsewhere was false.
“Real investors understand there is a cost attached to business, and the reality is Queensland has great capital growth and so much opportunity,” he said.
Domain Group chief economist Andrew Wilson said more demand was needed to cope with incoming supply.
“Brisbane has a record number of units on the horizon, and supply will jump well above demand,” Dr Wilson said.
“Unit
prices have been tracking backwards for a couple of years now, while house
prices have steadily improved.”
This story has been brought to you by the Emerald Chamber of Commerce Inc.
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