New measures will lead to an oppressive cocktail smothering foreign property investment says leading lawyer
AT the turn of the calendar year, our (previous) state government introduced a new surcharge on stamp duty aimed at foreign persons buying property in South Australia.
AT the turn of the calendar year, our (previous) state government introduced a new surcharge on stamp duty aimed at foreign persons buying property in South Australia.
This stamp duty surcharge has received insufficient public awareness and little, if any, industry consultation before, the then Treasurer, Tom Koutsantonis made the announcement.
Now, with a new state government, let us reassess.
The surcharge from January 2018 is a further 7 per cent stamp duty which at Adelaide’s current median house price, increases the total stamp duty payable by foreigners to about 11.3 per cent on residential purchases. That is nearly triple the stamp duty.
The creation of the surcharge was due in part to both Australia’s perceived housing affordability crisis and an increased fear that Aussie residents were being priced out of the market by foreign buyers. The intention was to level the playing field, rather than simply collecting more revenue.
I have struggled to find South Australians who feel that foreign buyers are causing issues in our property market that require this type of correction. This type of “crisis” is far more prevalent on the east coast. Yet the surcharge imposed on SA is the same rate as Victoria, Queensland and is 1 per cent less than NSW.
The punishment simply does not fit the “crime”.
Now add to the mix what else is happening in SA. From July there is no longer any stamp duty concessions on off-the-plan apartment purchases. Costs of construction are continuing to increase. Banks are tightening lending policies for both developers and buyers. All this leads to is an oppressive cocktail smothering foreign property investment without a noticeable shift in local sales.
We have seen several new property projects redesigned to meet the changing market, with other projects being delayed or cancelled.
We need to consider whether there is a fairer way to address foreign purchasers. I know from working in Dubai that “zones” were established, where foreign purchasers were permitted to buy property in certain city areas. Compare this to Singapore, where foreign persons can effectively buy apartments but not property that is comprised of land (i.e. a house with dirt).
In both markets, foreign property investment is funnelled into high-density property development, boosting their economies, with little impact on the local market.
In SA, most residents find apartment living difficult to grasp. By contrast, many foreign property buyers are seeking apartments to buy for their children or for investment.
Perhaps it may be useful to now exempt apartments from this foreign stamp duty surcharge, (foreign buyers can represent 30 per cent or more of apartment sales), without disrupting our residents who remain intent upon owning their own piece of dirt. It is clear the current scheme is unnecessary and is destined to strangle the SA property market.