Foreign Buyer Tax Must Go

On the lazy pretext of “everyone else is doing it”, the
McGowan government introduced a new tax on foreign buyers of property as a way
of raising additional revenue. About $123 million is expected to be raised over
the forward estimates by charging foreigners an extra 7 per cent transfer duty
on top of the original stamp duty normally payable. This extra revenue was
designed to off-set any raises in TAFE fees which, incidentally, have just been
halved.

At Perth’s median house price of about $480,000, foreign
buyers face a tax bill of $50,415. At Fremantle’s median price, a non-resident
would pay an eye-watering $89,900.

Foreign buyer taxes are justifiable when non-resident
purchaser activity is squeezing out local buyers who are looking to buy a home
such as recently experienced in the booming Melbourne and Sydney markets. It is
well known that Perth’s property market has been stagnant for at least a decade
with no net growth in property values for ten years. Transactions levels are
extraordinarily low, down 47 per cent compared to five years ago with 2018
returning the lowest level of sales since 1990.

Foreign buyers looking to invest in Australian property are
important because they often soak up sufficient newly built stock to ensure new
developments proceed, which keeps tradies employed and the economy growing. A
massive new tax acts as a significant disincentive and with credit tight and no
clear prospect that the local property market is set to boom, investors
(including locals) are not buying at the moment anyway. Investors having to pay
huge taxes will cop it where there’s a reasonable prospect that the capital
growth of the asset will soak up the tax cost in the medium term; not something
investors anticipate for the Perth market.

As a result, I cannot see how this tax is going to raise
much revenue at all. Right now, Perth needs to attract buyers not frighten them
off with enormous taxes.

In fact, it is causing further damage to the market. The tax
doesn’t just target foreign investors. For example, locals married to a
non-resident, living here on a spousal visa are also caught. That is because the
tax applies to the spouse’s half of the asset. At Freo’s median house price
that’s an extra $27,650 on top of $34,600. Couples in that situation, faced
with the prospect of such an impost are either simply choosing not to buy or
can’t afford to buy.

In a flying market where foreign speculators are outbidding
local buyers a special tax on non-residents makes some sense, but to justify
its introduction “because the east coast does” when our property markets
operate so differently is reckless,
unimaginative and bad policy that damages our economy.