Earlier this month when the RBA’s cash rate remained unchanged at 1.75 percent, most Aussies were elated. However for the high end property buyers in NSW, this change may not have much effect considering the newly announced rates for foreign buyers.
Last week, the NSW treasurer Gladys Berejiklian announced that foreign buyers looking for property in NSW will have to pay an extra 0.75 percent land tax surcharge and a 4 percent stamp duty surcharge on residential real estate. The stamp duty surcharge commenced on June 21 while the land tax surcharge will begin in January 2017.
“I don’t think the market will collapse but there will be ripples felt throughout the sector,” said Michael Pallier the director of Sydney Sotheby’s International.
With the current charges, a foreigner who is eying a $30 million property could incur $1.2 million in additional tax. This according to some of the prestige real estate agents is affecting the property market with some buyers reducing their budget price to factor in the extra costs.
According the NSW treasurer, the new NSW stamp duty rates surcharges are estimated to raise more than one billion dollars over four years. She also indicated that the NSW government “does not feel that these new charges will in any way compromise the property market.”
However, according to Gavin Morris who heads Juwai.com a Chinese property portal, there was still a strong motivation for Chinese buyers to invest in Australia.
“At the luxury end, buying in Sydney and Melbourne is comparable to buying in London and New York. You are buying world-class assets and some of the hurdles that they have to go through won’t outweigh the advantages that Australia has to offer,” he said.
“However there’s a breaking point. In the medium term there are larger forces at play that overcome the new charges, but we seem to be heading in that direction.”
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