Median stamp duty bill a record $31,210 (and $160k in NSW for foreigner investors): HIA

The stamp duty burden has hit a record high and taxing foreign investment is only worsening the crisis, developers say. The average stamp duty bill on a median-priced home has now reached $31,210 nationally, a 55 per cent increase since 2019.

Home construction is being held back by heavy taxes including imposts on foreign buyers.

The disconnect between federal migration policy and state-level taxes on foreign capital is worsening the housing crisis at a time when demand for accommodation is surging, the Housing Industry Association has warned.

The group, which represents the country’s largest developers, said that while the Australian government had increased net overseas migration, state governments had simultaneously escalated stamp duty and land tax surcharges on foreign investors, particularly in NSW, Victoria and Queensland.

The hit has come at a time when foreign capital is viewed as increasingly essential for boosting the supply of new homes in Australia, partly as offshore players have provided capital while locals have shied away.

Big deals include Proprium Capital taking over home builder AVJennings and Stockland forming a joint venture with a Thai group to buy the bulk of Lendlease’s housing estate business.

‘This is the worst own goal in the myriads of housing policy mistakes’: HIA chief economist.

But taxes applied over the last decade had “substantially raised” the cost of investing in new home construction, particularly apartments and greenfield estates, with foreign investors in NSW now paying $160,000 in stamp duty, land tax and foreign investment fees on a typical new dwelling. The imposts had severely weakened the supply of homes, a new HIA report said.

The group stressed the distinction between foreign residents, who are temporary migrants that occupy housing, and foreign investors, which are institutions that build housing but do not reside in Australia. Large Japanese companies, for example, have bought builders and backed the development of new housing.

Failing to distinguish between these different classes of investors had driven poor policy choices that reduced housing supply without a corresponding reduction in demand, the HIA said. The group called for the surcharges on foreign buyers to be scrapped and a better alignment of migration and housing policy.

“Australia cannot build 1.2 million new homes in five years while taxing the capital that is necessary to build those homes,” HIA chief economist Tim Reardon said. He warned Australia would not meet its housing targets while continuing to tax the capital needed to build new homes.

“Foreign institutional capital does not create housing demand. It creates supply,” Mr Reardon said. “Taxing this capital reduces the supply of homes being built, even as migration continues to surge and create demand. This is the worst own goal in the myriads of housing policy mistakes.”

The report also found that the average stamp duty bill on a median-priced home has now reached $31,210 nationally, a record high and a 55 per cent increase since 2019. In Queensland, the burden has nearly tripled. Upfront costs are forcing Australians to take on greater levels of debt, reduce the quality of housing they can afford, or stay out the market.

State governments have introduced punitive stamp duty and land tax surcharges on foreign capital over the last decade, with rates now as high as 9 per cent in NSW and 8 per cent in Victoria. Foreign institutions in these states now face up to $160,000 in stamp duty, land tax and foreign investment fees on a typical new dwelling, up to four-and-a-half times the amount paid by local investors.

“These imposts are likely to be revenue negative. Foreign capital is highly liquid and has moved to other economies that are open to foreign capital building apartments to meet the needs of a growing population,” Mr Reardon said.

“The combination of surging migration and stagnant home building, constrained by poor policy design, has left Australia in a housing deficit,” Mr Reardon said. “Reversing the foreign capital exodus is not only a rational economic choice, but also essential to delivering the homes Australians need.”

The HIA called for state stamp duty surcharges and land tax surcharges on foreign investors to be eliminated as well as adopting tax-neutral investment rules to encourage institutional participation.

Originally published as Median stamp duty bill a record $31,210 (and $160k in NSW for foreigner investors): HIA