Shock new Victorian government taxes proposed for Asian home buyers by Daniel Andrews
Foreigners buying houses in Victoria will be be required to pay new taxes, in an audacious state budget scheme aimed at capitalising on statistics showing foreign demand for new properties in Victoria has leapt from about 5% in 2011 to more than 30% in 2014.
Copying the practice of many Asian countries, foreign nationals will pay a new tax equivalent to 3% of the purchase price of Victorian apartments and houses, estimated to raise $279 million over four years if there isn't a backlash with Asian buyers instead going to other capital cities in other states.
On a CoreLogic RP Data median Melbourne house price of $605,000, foreigners would pay an extra $18,150 in stamp duty and on a $470,000 median Mebourne apartment price $14,100.
An $800,000 apartment will pay an extra $24,000, in addition to about $43,000 in current stamp duty charges. It is not clear if foreign buyers will enjoy current off the plan stamp duty exemptions.
It is proposed foreign housing investors will also pay an extra 0.5% in land tax from 2016 on new and existing properties, raising $53.5 million over four years.
Permanent Australian residents and New Zealand citizens are set to be exempt from the new taxes, and in the case of joint owners, the surcharge will be applied to the foreign owner's share only.
Victorian State Treasurer Tim Pallas said it was unfair that overseas buyers did not contribute their fair share for services and infrastructure.
Treasurer Tim Pallas, who is delivering his first budget on Tuesday, said the surcharges were "modest" and would force foreigners to contribute to services and infrastructure.
"It is inherently unfair on Victorians for foreign purchasers to take the gains of owning property in Victoria - through the services and infrastructure that Victorians pay for over an extended period of time - without contributing their fair share," Pallas told Fairfax Media.
"Amenity in and around Melbourne is important and it is why people are so keen to live here. If you own a property in the area then you should contribute accordingly, and these modest charges go some way to redressing that balance."
The federal government currently solely regulates foreign investment in Australia through the largely ineffective Foreign Investment Review Board (FIRB).
The FIRB revealed this week that the value of foreign investment in new Australian homes tripled last financial year.
China is the biggest foreign purchaser of Australian real estate, having spent $12.4 billion in 2013-14 - up from $5.9 billion in 2012-13.
Property commentator Pete Wargent blogged that Victoria (41%) and New South Wales (39%) accounted for 80% of foreign residential approvals by dollar value in 2014, with Queensland (11%) and Western Australia (5%) mopping up most of the remainder. South Australia accounted for just 0.4%.
Source: Pete Wargent.
Most of this investment in residential real estate was approved for new dwellings (11,338 approvals), rather than for existing property (7,915), vacant land (3,150), redevelopment (534) or developer approvals (103).