The real estate industry says foreign interest in SA property has plummeted since the State Government’s increase to the foreign investor surcharge

FOREIGN interest in South Australian real estate has plunged since the State Government’s increase to the foreign investor surcharge, according to the local real estate industry.

DG Real Estate’s Simon Hou says foreign interest in Adelaide property has plunged by more than 85 per cent. Pic: Kelly Barnes

FOREIGN interest in South Australian real estate has plunged since the State Government’s increase to the foreign investor surcharge, according to the local real estate industry.

The sector says the increase from 4 to 7 per cent, announced by the State Government in November and applying to settlements from this month, has brought investment to a halt, sparking fears of a major oversupply of city apartments.

DG Real Estate principal Simon Hou, whose clients include a large number of Chinese investors, said many were abandoning earlier deals in order to avoid the unanticipated cost.

Unlike other states, South Australia imposes the levy from settlement date rather than the date the contract is signed.

That leaves many off-the-plan apartment buyers exposed, according to Mr Hou, as they would have been unaware of the cost when signing their contract.

“I originally asked for an exemption for CBD apartments but was unsuccessful and since then overseas investor demand has dropped dramatically, by more than 85 per cent - it’s huge,” he said.

“Generally when we sell apartments the buyer pays a 10 per cent deposit, but now with an extra 7 per cent for overseas investors, many people are just walking away from their deposits and not settling.”

Combined with the city’s sluggish population growth, the levy could lead to a major oversupply of CBD apartments, Mr Hou said.

A recent report from international real estate group Colliers International revealed that close to 30 per cent of Adelaide’s apartment development pipeline is being funded by Chinese interests, with many of the apartments sold to Chinese investors.

Property Council SA executive director Daniel Gannon said the State Government was sending mixed messages to foreign investors.

“The State Government has recently embraced foreign investors like Sanjeev Gupta and Elon Musk, but at the same time is signalling an appalling mixed message on residential foreign investment,” he said.

“It has to work out which message it wants to send to foreign investors - South Australia is either open to foreign investment or closed.

“Imposing a tax on foreign investors places at risk significant residential developments in the city of Adelaide, which will have a direct impact on young South Australians who wear hard hats and steel caps on construction sites across the state.”

As part of its pre-election wishlist, the Real Estate Institute of South Australia will be calling on both sides of politics to scrap the surcharge.

“I’m hearing that interest interstate from overseas buyers is zero and so there would have been an opportunity for those investors to help us here in SA,” REISA chief executive Greg Troughton said.

“He (Treasurer Tom Koutsantonis) may be heralded as a hero but the state was built on investment and the stories I’m getting from real estate agents is that you won’t be seeing too many cranes in the skyline after this silly, silly decision.”

The increase in the foreign investor surcharge is expected to raise an extra $36.6 million over four years.