Foreign takeover: Investors snap up SA homes

The number of foreign investors snapping up SA homes and buildings is on the rise with more than 1000 buying up in the past two years.

More than 1000 foreign investors have snapped up homes across South Australia in the past two years, but experts have warned a tax on overseas buyers is worsening the state’s housing crisis.

New data obtained by The Advertiser shows the number of overseas investors purchasing homes in SA has been increasing each year since the 7 per cent Foreign Ownership Surcharge was imposed by the Weatherill government at the start of 2018.

Despite the steady growth, the Urban Development Institute’s SA chief executive, Pat Gerace, said the tax discouraged investment in homes that could be placed on the rental market to address a crippling housing shortage.

“We currently have a housing crisis, for which we need more new houses and in particular rentals – and overseas investors who see the market as a good destination can provide some of that rental relief,” Mr Gerace said.

Urban Development Institute of Australia (SA) boss Pat Gerace warned the foreign ownership tax could discourage much needed investment in housing.

“We need to think about the broader picture in terms of total land supply and the role investors can play to provide new rental properties, rather than a narrow-minded view where people feel like they’ve been priced out (by foreign investors).

“Having a transactional tax that prevents people from investing or having more houses being built makes the land supply and housing crisis issues worse.”

Mr Gerace warned the surcharge could thwart the progress of large CBD apartment projects that need certain levels of pre-sale investment before proceeding.

Treasurer Stephen Mullighan ruled out abolishing the foreign investor tax.

“The industry suggestion that abolishing it and making it easier for foreign investors to buy residential property somehow improves South Australians’ access to affordable housing is absurd,” he said.

Treasurer Stephen Mullighan said it was “absurd” to suggest getting rid of the Foreign Ownership Surcharge would help the housing crisis.

“Since coming to office we have commenced building housing for those most in need and introduce low deposit home loan products with Homestart.”

The Treasurer also said thousands of new homes would also be built under the federal government’s Housing Accord policy.

While in opposition last year, Mr Mullighan said the number of foreign buyers snapping up homes was “making it even harder for young South Australians to break into the housing market”.

So far this financial year, there have been 220 separate transactions that have attracted SA’s foreign investor tax, generating $13m in revenue for the state government. It is on track to surpass the 2021-22 total of $14.9m, generated from 500 purchases and the 2020-21 total of $14.4m.

In 2019-20, a whopping $36.3m in the tax was generated from just 420 transactions.

Major student accommodation provider, Scape, was hit with $3m in stamp duty and $3.85m in foreign ownership tax when it bought a Waymouth St building that divided the community over its “brutalist” architectural design.

Scape successfully challenged millions of dollars in taxes on the purchase. Picture: Colin James

Scape successfully challenged the taxes in the Supreme Court, arguing the $55m purchase should have been exempt as the building was used for student accommodation – not residential living.

The data obtained by The Advertiser also showed the top foreign investor hot spots for the last two years.

Adelaide’s CBD topped the list, attracting 267 foreign investors since the start of the 2020-21 financial year.

Suburbs in the 5085 postcode – including Lightsview and Enfield – were also popular, with 42 foreign investments recorded in the same period. There were 29 purchases in the 5072 postcode, which includes the suburbs of Magill and Rosslyn Park.

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