NSW luxury home market affected by new stamp duty charges

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The new stamp duty charges implemented this week in NSW are already affecting sale prices and causing uncertainty among prestige homebuyers, real estate agents say.

The NSW government has announced last week that foreign buyers will have to pay a four per cent stamp duty surcharge and an extra 0.75 per cent land tax surcharge on residential real estate. The latter will commence in 2017.

“I don’t think the market will collapse, but there will be ripples felt throughout the sector,” said Michael Pallier, Sydney Sotheby’s International director.

A $30 million property could incur a $1.2 million additional tax, making it inevitable for international buyers to factor in the extra cost.

“My feeling is that initially they will be asking the vendor to pay for this and this may adjust the prices slightly,” Pallier said. “At worst it could bring a four per cent reduction, which is quite significant.”

According to NSW Treasurer Gladys Berejiklian, the new stamp duty charges can raise more than $1 billion over four years. She also said that the government “does not feel this will in any way compromise the property market at all.”

However, Gavin Norris of Chinese property portal Juwai.com argued that though the motivation to buy in Australia remains strong in Chinese buyers, they could reach a breaking point.

“At the luxury end, buying in Sydney and Melbourne is comparable to buying in London and New York. You are buying world-class assets and some of the hurdles that they have to go through won’t outweigh the advantages that Australia has to offer,” he said. “However, there’s a breaking point. In the medium term, there are larger forces at play that overcome the new charges, but we seem to be heading in that direction.”

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