The Western Australian government hopes to raise $48 million in additional revenue through a 4 per cent surcharge on property purchases made by foreign buyers.
The surcharge, which will apply to the purchase of residential properties from 1 January 2019, is expected to raise $49 million over the forward estimates and a net revenue of $48 million.
“The government did not consider other increases to property tax as part of its budget repair measures, recognising the impact of the three consecutive land tax increases in the 2013–14, 2014–15 and 2015–16 budgets under the previous government,” WA Treasurer Ben Wyatt said.
The changes follow similar moves in New South Wales; in the June budget, it was revealed that the surcharge on stamp duty for foreign buyers could double to 8 per cent.
What effect will it have?
Just last week (6 September), however, the Housing Industry Association (HIA) warned that governments should “proceed with caution” as “punitive measures” against foreign investment activity could trigger an accelerated decline in home building.
According to the HIA, foreign investors inject up to $70 billion into Australian real estate annually.
Additionally, at a speech made in Sydney on 8 September, the governor of the Reserve Bank of Australia (RBA), Philip Lowe, said that he predicts the financial relationship between Australia and China would “deepen further” and noted that China is an “important source of direct investment” in Australia.
He added: “The internationalisation of the renminbi [the Chinese currency] and the associated capital account liberalisation in China is likely to be one of the biggest forces shaping the global financial system over the next decade or so.”
This view is supported by CT Johnson, managing director at China research company Cross Border Management, who told Mortgage Business that attempts to hold back Chinese investment were akin to attempting to “hold back the ocean with a broom”.