Taxing foreign buyers the focus of the NSW State Government budget

Taxing foreign buyers the focus of the NSW State Government budget
Taxing foreign buyers the focus of the NSW State Government budget

Taxing foreign buyers, rather than any new hand outs to first home buyers was the focus of the NSW State Government budget.

Treasurer Gladys Berejiklian said she wanted to be cautious when dealing with the property market.

The State Government is not tipping any Sydney property market correction, just a likely easing.

The state budget didn't raise or lower property taxes, other than the much anticipated new taxes on foreign investors.

All foreign property investors in NSW will be hit with a 4 percent stamp duty surcharge when buying homes and apartments and face an ongoing extra 0.75 per cent land tax surcharge on their residential property holdings.

Treasurer Gladys Berejiklian said she was confident the extra costs would not deter foreign buyers given other states had similiar measure.

"Economists say it is an inelastic market," she said, when asked if there could be any fallout.

The NSW Treasurer Gladys Berejiklian's second state budget anticipates a slowing in stamp duty revenues from home sales.

But they will still get $8,777 million in the next financial year, then $9,124 million in 2017-2018.

"I don't apologise for be very cautious when it comes to the property market," she said.

Residential transfer duties are tipped to rise at 4.4 percent annually over the next four years, "significantly more subdued than the pace see in recent years."

There was 13.6 percent growth in the current budget year, and a stunning 40 percent growth when the boom was its most robust in 2013.

The NSW State Budget officially revealed an extra $835 million extra stamp duty purchasing revenue will come from foreign buyers over the next four years.

It also expects $166 million is over the next four years from land tax on foreign investors.

NSW land tax revenues are forecast to rise at a faster rate than stamp duty revenues.

Land tax on investors will yield 8.1 percent higher revenue every year for the next four years, taking revenues from $3,136 million this year to $3,761 million in 2019-20..

The housing boom longevity is not being assumed by the NSW Treasury who suggest price growth was "moderating."

Transfer duty represents 29% of state government revenue. Land tax represents 11%.

The budget papers noted there was potential downside risk of a decline in the broader housing market.

On the upside was "the impact of low, and possibly even lower interest rates leading to stronger housing construction and consumer spending," the budget papers advised.  

There was no change to NSW first home buyer grants in the state budget with the January 2016 reduction from $15,000 to $10,000 triggering a smaller govenment outlay.

Just $96 million was spent on the first home new home scheme this year, down on the $115 million in the 2014-15 year. The first home exemptions and concessions are estimated to sit at $88 million next financial year.

"We are doing every thing we can for first home buyers," Berejiklian said.

"The key thing is to continue to focus on supply," she added noting that there had been record levels of 70,000 new homes in the year to April.

"We are spending on infrastructure in local areas conducive to housing." 

She anticipated any glut in apartment numbers would contribute to housing affordability by putting "downward pressure on prices." 

"I appreciate the challenges people go through to get into the market."

She also signalled her concern at the Federal Labor's negative gearing tax policy. 

"Without being over dramatic I am concerned that the election of a Shorten government will jeopardise conditions in NSW," she said.

Jonathan Chancellor

Jonathan Chancellor

Jonathan Chancellor is one of our authors. Jonathan has been writing about property since the early 1980s and is editor-at-large of Property Observer.

Tags: 
Taxation Foreign Investment

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