Australia, and Sydney, in particular, have always been magnets for foreign investors. Our strong economy, multicultural society, and beautiful natural landscapes, entice many foreigners to buy property. However, some developers and property experts fear that foreign demand may be weakening after both federal and state governments recently tightened rules for foreign buyers.
What are the New Rules for Foreign Investors?
Recent crackdowns by state governments include:
- NSW Government – stamp duty doubled for foreign buyers from 4% to 8% and land tax surcharge increased from 0.75% to 2%.
- VIC Government – introduced a vacant residential land tax where owners can be fined up to 1% of the property’s value if they leave their properties empty.
- Federal Government – capital gains tax exemptions removed for overseas buyers and a 50% ownership cap for new residential developments.
- ATO given the power to fine foreign investors up to $5,500 a year if their properties are left vacant and up to $52,500 for failing to lodge their forms.
Is Foreign Investor Demand Weakening?
Business Insider reported earlier this month:
The survey also revealed
- The percentage of properties sold to foreigners in New South Wales fell from 21.6% to 18.1% during a three-month period.
- In Victoria, properties sales fell from 21.6% to 21%.
- In Queensland, the percentage of properties bought by overseas buyers fell from 15.4% to 13.8%.
While these figures do show a drop in sales to foreign buyers, overseas investors still represent a significant proportion of overall sales.
Will Property Prices Be Affected?
December CoreLogic data showed that national house values dropped by 0.3% and while the new rules for foreign investors caused only a modest decline in the number of properties sold to overseas buyers, experts believe that they are likely to impact property prices. Dr Shane Oliver, chief economist at AMP Capital, believes the Sydney and Melbourne property boom will continue to deflate.
“Tighter lending standards, rising levels of unit supply, slower Chinese demand and reduced investor enthusiasm for property are all impacting and are likely to lead to further declines in Sydney and Melbourne property prices this year of around five percent — maybe a bit more in Sydney and a bit less in Melbourne,”
Our thoughts? As a Sydney Mortgage Broker, we believe that property in this city will always be in high demand. Prices may drop slightly in the coming year but we’ll have to wait and see. Exciting times!