Being locked in the windowless basement of Dumas House last week for Treasurer Wyatt’s state budget has some benefits. The coffee’s not bad, lunch is free and you have to hand in your mobile upon entry so it’s four blissful hours of relative quiet.
In the lead up to the budget I’ve been asking (well pleading really) with the Treasurer to introduce measures that’ll help affect positive change to the WA property market. REIWA asked for the government not to raise stamp duty or land tax rates and we’re grateful they didn’t, but they have introduced an additional foreign buyer tax of 7 per cent.
“So what, that doesn’t affect me,” I hear you say. Well, consider this. At Perth’s median house price of about $520,000, a foreign buyer will pay $55,115 in tax if buying a home. That’s equal to 3 years’ rent at Perth’s current median of $350 per week so I’d imagine non-residents here for the short term will choose to rent rather than buy; pushing up rents.
Also, the tax only applies to properties that are either single detached homes or within a group of 10 or less. This means larger apartment complexes will continue to attract foreign buyers whilst developers trying to address the “missing middle” of housing types in Perth by building villas, maisonettes or townhouses will miss out on these buyers. These sort of distortions in any market are counter-intuitive, particularly when the government are so keen to improve housing diversity in and around their Metronet Hubs.
The government claims the tax will raise $123m and that it simply brings WA into line with the eastern states. I’d not be unhappy about such a tax if our market was flying along like Sydney and Melbourne has been where foreign buyers can adversely affect affordability, but our market is just starting to recover from the lowest levels of sales activity since 1990.
Unfortunately, the budget failed to address the flawed First Home Owner’s Grant with builders and land developers continuing to benefit from the current policy, adding to urban sprawl we can ill afford.
There was no incentives added for seniors looking to down-size either with many retirees in homes larger than they need but stuck there partly because of exorbitant stamp duty costs.
Most commentators have labelled the budget as “boring” and for property, that’s an apt descriptor. It’s also a missed opportunity to consider changes to transfer duty and other such taxes that act as barriers to economic growth (payroll tax), by replacing them with a broader based land tax regime that loosens the shackles on the property market, encourages trade-up activity and releases more affordable established entry-level housing.