Surcharge proposals by the NSW Government to make it harder for foreign investors to buy housing will only slow down housing supply, the Urban Taskforce has said.
The NSW Government on Monday flagged a possible 1.5 per cent surcharge for foreigners buying houses in Australia with housing affordability being cited as the reason behind the move.
In addition, NSW Treasurer Gladys Berejiklian raised the prospect of introducing a foreigner land tax surcharge of between 1 and 1.5 per cent in next month’s state budget.
“The proposals by NSW Treasury to impose a 1.5% surcharge on land tax on foreign investors in housing will be a disincentive to invest in NSW,” says Urban Taskforce CEO, Chris Johnson.
“It seems that the aim is to match the surcharge in Victoria which will remove the point of difference that NSW has.
“The Sydney region needs 33,200 new homes a year according to the Department of Planning but last financial year only 27,348 were built leaving a shortfall of nearly 6,000 homes. We must do all we can to boost housing supply and foreign investors have been contributing to this particularly through new apartments. To send a message that these investments are not wanted in NSW can only reduce the flow of capital into new housing.” “Foreign investors often help make development projects become feasible by underpinning the pre sales with up to 15% of purchases and this helps local purchasers buy into a viable project," Mr Johnson said.
A 2015 report by finance house Credit Suisse said Chinese buyers were “important drivers of house prices”, having claimed 23 per cent of new housing stock in Sydney and 20 per cent in Melbourne in 2013-14. Investment from Chinese-based investors and new immigrants could double over five years to $60 billion.
Mr. Johnson said the surcharge could mean less new stock on the market and less buyers.
“The argument for the surcharge seems to be to free up more housing for first home buyers by reducing the number of purchasers but this can only lead to less new homes being built. With an undersupply already pushing prices up a further reduction in supply is likely to only increase home prices.
“There has been a slow-down in housing approvals in NSW over the last 6 to 8 months and an additional tax on foreign investment in housing will only lead to a further slow-down. Already Sydney has the council amalgamations causing some concerns over planning and discussion about adding value capture levies to new development beginning to affect confidence in the market so the possible extra levy on foreign investment will further erode industry confidence,” he said.