Victoria to charge stamp duty twice for foreign buyers

More government meddling in the market, just as the market is getting deep in oversupply:
Victorian government increases stamp duty for foreigners

 

Yes, but the real oversupply is in CBD apartments bought OTP where the stamp duty is negligible.

 

May as well make more money off of cashed up investors. This is good policy that needs to be adopted by other states.

 

That's what should have been done a long time ago.

 

I too would like to see this adopted for nsw on ALL properties.

 

Won't make a difference. Might as well make more out of it.

 

The other part of the announcement was actually the best bit. A1.5% land tax surcharge for foreign owners not residing in aus. #Proudmoment When 'freehold' aint so freehold. Absolute game changer that is.

 

wonder what the definition of 'foreign' is. In QLD this catches Australian citizens and permanent residents who reside overseas.

 

Freehold's never been free. Otherwise there wouldn't be land tax.

 

Article from Steve McKnight, he suggests it'll send buyers into other markets:

--

A game changer has been announced that will impact Aussie property investors, particularly those in Victoria.

Earlier today, the Victorian Treasurer – Tim Pallas – announced that from 1 July foreign purchasers of Victorian real estate will pay the normal stamp duty PLUS an extra 7% of a property’s value. It should be noted that this is an increase (to 7%) from the the already imposed 3%.

As an example, an Aussie citizen buying a $700,000 home in Victoria would pay stamp duty of $37,070. A foreigner buying today would pay $58,070. A foreigner buying after 1 July 2016 will pay $86,070. That’s 12.29% of the purchase price. Ouch.

There is also a nasty little increase to land tax too for ‘absentee owners’ – an increase from 0.5% to 1.5%

Although the Treasurer spruiked that Victoria is the favoured place for foreigners to park their money, the Australian Financial Review reports that “Purchases of new properties in Victoria by foreign buyers fell to 10.7 per cent in the three months to March from 32.5 per cent in December 2014.”

Why is this newsworthy?

Well, it seems the lessons of the failed NSW government attempt in 2004 to slug all property owners with a exit stamp duty of 2.25% have been ignored. All that did was pour cold water on the property market and create a political stench that still lingers in the nostrils of NSW property investors.

Economics 101 says if you increase the cost of business, that business will move to a more efficient (cheaper) market. In this case, anywhere other than Victoria. Take away that demand and unless the number of houses available for sale diminishes too, price must fall. But hang on… there has been a glut of new apartments approved over the past 12 months, so the supply pipeline is gushing and now demand has been throttled back! Nuts! Victoria loses, everywhere else wins.

That said, there may be a scramble for foreigners to sign up contracts between now and 1 July so as to only have to pay a 3% surcharge. Developers better fire up their marketing campaigns fast.

The property market in Victoria is already peaking. A dumb announcement like this may result in some political high fives by the boffins in the bowels and back rooms of Parliament, but for those in the real world, this will hurt sentiment and push buyers to other markets.

 

This can effect trustees of discretionary trusts purchasing in VIC. If foreigners are potential capital beneficiaries of the trust it could apply.

 

Steve who?
In VIC there is a full stamp duty exemption on the dwelling proportion when buying off the plan (pre construction) so a negligible SD increase for these foreign investors as apt carry little land values(the ones we should be encouraging

 

I wonder if other states will follow this example?

With the outflows of capital from China being restricted, I wonder also how much heat will be taken out of the overall foreign investor market (China + all others) overall?

 

m.theage.com.au/nsw/gladys-berejiklian-declines-to-rule-out-stamp-duty-land-tax-surcharge-for-foreign-buyers-20160424-godqmk.html