How will the foreign levy hike affect South Australia's housing market?

Despite the name on the tin, it won’t just be foreigners bearing the brunt of increasing the foreign investor surcharge, according to auctioneer and real estate agent Jonathan Teng.

In a report on ABC News, Teng noted that not only would this new government policy repel foreign investors from entering the housing market, but it would also have an adverse effect on property prices.

"The property turnover is slowing down and also the price of property might also be impacted in a negative way," Teng said.

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The government decided to raise the foreign investor surcharge from 4% to 7% as part of its Budget Measures Bill, which will apply to foreign investor property settlements starting in January next year.

While other states have already laid out similar levy increases on foreign nationals, South Australia was the only state to impose the fee from the settlement date. This would mean that investors who acquired a property more than a year ago would have to settle the 7% levy especially if their property is not built before the year ends.

DG Real Estate Adelaide principal Simon Hou told ABC News that a significant number of people who had signed off-the-plan contracts before the announcement were not being obliged to pay the extra charge, and that other potential buyers have already decided not to invest in South Australia after the announcement.

Hou underscored that need for the State Government to allow a foreign investor surcharge exemption for residential property in Adelaide's CBD to ease the negative impact on investment in the city.

"Over the last 15 years the CBD apartments don't really have much capital growth or the majority of them actually have no growth over last 10 to 15 years," he said.

Without foreign investment, he reckoned that "the CBD apartments might have a collapse in price in capital price."