Foreign property buyers tipped to leave Australian market in droves as tax hikes take effect

This article was originally published by Stuart Marsh on Jan 12th 2018 via finance.nine.com.au

The number of foreign investors purchasing Australian property is forecasted to dip significantly as tax hikes across the country take their toll.

Data from ANZ/Property Council of Australia forecasts that in NSW foreign buyers will snap up just 18.1 percent of residential properties on offer until March 2018, down from the record high of 24 per cent in September 2016.

In Australia's other hot property market, Melbourne, the fall will be less dramatic - 21 percent of sales will be expected to go to foreign investors, down from 25.2 percent at the same time last year.

In Queensland, the forecast of foreign investment has plummeted to just 13.8 percent for the three months until March 2018, compared to 17.5 percent in December 2016.

In South Australia, foreign buyers were tipped to fall to 11.6 percent - down from 15.6 percent in March 2017. In Western Australia that number is tipped to be 9.1 percent down from 11.4 percent in March 2017 and in the ACT foreign buyers were tipped to account for 10.9 percent down from 17.9 percent in December 2016.

The ANZ/Property Council data did not show expected forecasts for Tasmania and the Northern Territory.

Foreign buyers overwhelmingly preferred new dwellings, with purchases of brand-new houses and apartments accounting for 22.1 percent of foreign investment spend, compared to the 2.5 percent spend on existing dwellings.

The ANZ/Property Council survey canvasses the views of more than 1,110 property experts including developers, agents, government heads and owners.

Daniel Gradwell, senior economist at ANZ, said the majority of property experts interviewed for the survey believed that interest rates will not go up in 2018.

"A majority (70 percent) of respondents believe interest rates will remain the same over the next 12 months, compared to 40 percent as recently as June 2017," said Gradwell.

"This is in direct contrast to ANZ’s view. We believe that the RBA will hike the cash rate twice this year, as the Bank becomes more comfortable that wages appear to be trending higher. However, this view is certainly not without challenges."

The recent tax reform,s as the government tries to open housing supply to local first-time home buyers, is generally thought to be the reason for the downturn in foreign investment.

In NSW, the 2017 Budget increased the stamp duty surcharge for foreign investors from 4 percent to 8 percent, in addition to increasing the annual land tax surcharge from 0.75 percent to 2 percent.

In Victoria, from July 1 2016, foreign investors have had to pay an additional 7 percent tax on top of their land transfer duty.

In addition to these tax hikes is tougher investment rules from the Chinese government, where individual buyers have been limited to an annual $US50,000 limit on foreign currency purchases.

A recent report from investment bank UBS found that the interest of Chinese buyers in Australian property will fade in 2018 as their attention turns to the booming market of Bangkok.

"A lot of first home buyers will certainly hope that this prediction translates into good news for them," said Nine's political reporter Kerrie Yaxley.

"One bank estimates that Chinese buyers make up 80 percent of overseas-based property buyers."