Wednesday, 29 November 2017

Foreign property buyers feel SA sting of dumped bank tax


The hammer has come down on foreign property buyers with a surcharge lifted to 7 per cent from January 1 to partially make up for the ditched state-based bank tax.

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Foreign property buyers will feel the sting of the decision by the South Australian Government to dump its controversial state-based bank tax in a move which property experts say will dampen demand in a market which hasn't experienced the boom of Sydney and Melbourne.

A foreign property buyer surcharge of 7 per cent will apply from January 1, 2018 in South Australia after the measures passed the state's upper house of parliament late on November 28, a higher rate than the original 4 per cent foreign buyer tax announced in the June state budget.

SA Treasurer Tom Koutsantonis increased the planned tax from 4 per cent to 7 per cent to partially fill a hole after the state-based bank tax was ditched on November 15 following a vigorous campaign by the Australian Bankers Association, ANZ, CBA, NAB and Westpac.

But the property industry is furious, arguing it will deter foreign buyers who make up an estimated 10 per cent of total buyers in South Australia, well below the foreign buyer component in Sydney and Melbourne.



Stockbroking house Credit Suisse estimated in October that foreign buyers, most of them Chinese, were buying the equivalent of 25 per cent of new housing supply in NSW.

Alex Ouwens, a principal of real estate firm Ouwens Casserly and also the president of the Real Estate Institute of Australia, said it was a disappointing move at a time when the local economy was at a "tipping point".
"It's certainly a massive impost on foreign investment in the state," Mr Ouwens said on Wednesday. High existing stamp duty rates on residential property combined with the increase in the foreign buyer surcharge would also dampen activity among builders and developers.

He said the Adelaide residential market was a slower and steadier performer delivering annual gains of between 3 to 4 per cent over an extended period, and hadn't experienced the dramatic jumps of Sydney and Melbourne. "We don't have that same boom," he said.

Apartment living was also less popular in Adelaide, with many buyers preferring traditional stand-alone houses. "It's a horizontal living environment rather than vertical," he said.

NSW doubled its foreign buyer surcharge to 8 per cent in its state budget earlier this year, while Victoria has a 7 per cent surcharge.

Daniel Gannon, SA executive director of the Property Council of Australia, said the state needed policies that attracted investment and the foreign buyer surcharge was a bad move.

"Instead of toasting 2018 and welcoming the new year, the first day of January will mark a tax hangover for investors as the increased foreign investor surcharge takes effect," Mr Gannon said.

"The passage of this damaging tax shines a bright red light for investment in South Australia and demonstrates the need for strong political leadership."
Mr Gannon said it was a punitive tax.

The South Australian Government's foreign property buyer surcharge is expected to raise $85 million over the next four years, but will only partially make up for the foregone bank tax revenue. The state-based bank tax had been originally earmarked to raise $370 million over four years, but those figures were later revised upwards by state Treasury officials to $417 million.

The tax was to be levied on the four big banks - ANZ, CBA, NAB and Westpac - plus Macquarie, in a similar style to the Federal major bank levy. It was announced in the June State Budget by Mr Koutsantonis in a move which stunned the banking industry.

Read more: http://www.afr.com/business/banking-and-finance/financial-services/foreign-property-buyers-feel-sa-sting-of-dumped-bank-tax-20171128-gzut7t#ixzz4ztaxVawX
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