The government of New South Wales is considering increasing the stamp duty paid by foreign investors to help more first-home buyers enter the state’s notoriously overpriced property market.
More than one in ten residential properties sold in NSW is being snapped up by foreign investors, a third of whom are Chinese nationals.
Data from NSW’s Office of State Revenue (OSR) shows that from July to September, foreign nationals accounted for 11% (or 2,995) of residential property purchases, compared with 7.51% made by first-home buyers.
Opposition leader Luke Foley is also pushing for stamp duty to be increased – from 4% to 7% for foreign investors on residential homes – to mitigate the pressure they exert on house prices.
“Evidence suggests a surcharge on foreign investors will take some pressure off house prices and go a way to levelling the playing field for first-home buyers,” Foley said on Tuesday.
NSW Treasurer Dominic Perrottet said he was aware of the problem and would lift the surcharge in the June budget.
On the other hand, some experts have expressed doubts that raising stamp duty would improve housing affordability for NSW’s first-home buyers.
Professor James Laurenceson, deputy director of the Australia-China Relations Institute (ACRI) at UTS, recently expressed his scepticism. “The housing prices, particularly in Sydney, are still going up and that gets at this point — even if the proportion of foreign buyers falls it doesn’t mean that house prices are going to fall,” he said.
Laurenceson said it wasn’t true that foreign buyers, particularly those from China, were pushing Australians out of the property market. “Foreign Chinese buyers only account [for] 3.6 per cent of demand in New South Wales — a lot of that demand is for new apartments, new houses, not existing houses,” he said.
In contrast, 96.4% of buyers were local, making it a bit of a stretch to blame the state’s rising housing unaffordability on foreign investors. “Something that the Reserve Bank of Australia has long talked about is the fact that the types of properties foreign investors are buying are not the types of properties first-home buyers are buying,” he said.
A senate inquiry into the matter last year found that demand from foreign investors helped increase housing supply in Australia.
“It’s basic economics. If you expand supply it’s going to restrain housing price growth, it’s certainly not going to put upward pressure on it,” Laurenceson said. “There’s lots of reasons why housing prices are going up —but laying the blame at the feet of Chinese buyers when they only account for 3.6 per cent of total housing demand is clearly a misleading narrative.”
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