SA must not deter foreign real estate investors
South Australia must not follow Victoria’s lead and slug foreign real estate buyers an additional stamp duty surcharge, says the State’s peak representative body for the urban development industry.
In the lead-up to the SA State Budget on Thursday (June 18), the Urban Development Institute of Australia (SA) warns the State Government against introducing a similar tax hike for foreigners who purchase property in South Australia.
“The Victorian Government has proposed a new 3% additional stamp duty surcharge on all residential real estate by foreign purchasers. SA must not follow this lead,” said UDIA (SA) Executive Director Terry Walsh.
“While the Victorian Government proposal is expected to raise revenue of several hundred million dollars over the forward estimates period, it is likely to reduce the supply of dwellings to renters and thus increase rental prices. Other revenue to government will fall also.”
Mr Walsh says details of Victoria’s foreign stamp duty surcharge remain sketchy, but the proposal is expected to hit major developers, particularly those which are majority foreign owned.
“The proposed tax in Victoria has other ramifications too, including a ‘double tax’ where a developer pays duty on its acquisition of residential land, with a foreign buyer of the completed project – whether it be an apartment or house – also slugged on their purchase,” he said.
“An additional stamp duty tax for foreign buyers must be avoided at all costs here in SA. If the State Government does introduce such a tax in its upcoming Budget, the effect on our property development industry would be profound.
“Treasurer Koutsantonis must recognise that growth of new housing in SA is much slower than in Melbourne or Sydney, and must not be tempted to follow Victoria and introduce the same budgetary measure here.
“In fact, the South Australia Government should actively attract foreign investors to come to Adelaide, invest their money in our property projects and provide housing opportunities at attractive prices for our people.
“This could be a significant point of difference for Adelaide when foreign investors are weighing up where to spend their money in Australian cities.”
Mr Walsh also points to the Australian Government’s recent Report on Foreign Investment in Residential Real Estate – tabled in November last year – which highlighted that “foreign investment in residential property increases the demand for, and supply of, housing” and is “likely to put downward pressure on rental costs and increase government revenue from stamp duties and higher economic activity that flows from these additional investments”.
“The Federal Government’s report also highlights analysis from the Real Estate Institute that foreign investment is increasing the supply of new housing and that many developments would simply not have occurred had it not been for the prospect of foreign buyers,” said Mr Walsh.
“The report also includes significant comments from the Reserve Bank that foreign demand for Australian dwellings can – and has – provided a stimulus to the local residential construction industry, which currently accounts for around 9% of total employment in the Australian economy.”
Established in 1971, the UDIA (SA) represents the interests of the development industry in
South Australia in collaboration with all levels of government. It represents all sections of the urban development sector, including developers, councils and service providers such as engineers, planners and surveyors. As the fifth largest contributor to output in SA, the property development industry employs 56,000 people or 7% of the State’s total workforce, and accounts for almost $9 billion or 12% of Gross State Product.
FURTHER INFORMATION: Please contact UDIA (SA) Executive Director Terry Walsh on 0408 704 790