Victoria’s state Budget ‘not too damaging’ for foreign homebuyers

Higher taxes for foreign buyers announced in the state Budget have been dubbed “dispiriting but not too damaging”, with Victoria expected to remain Australia’s favoured city for Chinese buyers.

Higher taxes for foreign buyers announced in Monday’s state Budget are “dispiriting but not too damaging”, with Victoria expected to remain Australia’s No. 1 destination for Chinese buyers.

This is the verdict of chief executive of leading international property website Juwai.com, Carrie Law, who said Victoria’s capital was ahead of Sydney as the nation’s market of choice by “a wide margin”.

The Budget hiked Victoria’s foreign buyer stamp duty from 7 to 8 per cent, and the absentee owner tax from 1.5 to 2 per cent.

These increases have been forecast to bring in a whopping $330 million to help boost this year’s Budget, with stamp duty notably set to be written down by $5.2 billion since last year’s.

“Land bankers” maintaining a second title for a tennis court or other uses in metropolitan Melbourne will also have to consolidate titles or pay land tax on the second title under the government’s tax changes — set to raise $44 million.

Ms Law said the hit on foreign buyers was of little surprise: “There is an old saying to the effect that those who can’t vote, pay,” she said.

“(But) the fact prices in Victoria are lower than in Sydney has helped to drive Chinese purchasing.

“The foreign buyers’ tax that was until now 1 per cent lower than in New South Wales also contributed to support demand.”

Ms Law expected the Coalition’s federal election victory to conversely have “a positive impact on Chinese real estate investment”, based on research conducted by Juwai.com in the lead up.

The most recent Foreign Investment Review Board annual report showed overseas buyers were given approval to spend $5 billion on residential real estate in Victoria in 2017-18 — plummeting from $11 billion and $28 billion the two years prior.

Juwai.com expects Chinese investment to remain “flat” this year.

Meanwhile, Victoria’s peak body for homelessness has praised the state government’s commitment to extend the Private Rental Assistance Program, which helps about 4000 family violence survivors achieve rapid rehousing through the private rental market.

The Council to Homeless Persons also welcomed the delivery of 1000 new public housing units, costing $209 million, confirmed in the Budget.

But chief executive Jenny Smith said the government needed to increase its investment to provide 3000 social housing properties per year.

“Research has identified Victoria has a shortfall of 102,800 social housing properties,” Ms Smith said.

And Real Estate Institute of Victoria president Robyn Waters said the Budget addressed many of the REIV’s priorities, commending its support of small businesses, and its investment in infrastructure and jobs in regional Victoria and urban growth corridors.

This included $2.6 billion to support jobs, economies and communities in regional Victoria, and $50 million for the “Growing Suburbs Fund” to build and upgrade community facilities in 10 rapidly developing Melbourne municipalities.

But she said the Budget’s reliance on property taxes was “of great concern to our industry”.

Originally published as Budget ‘not too damaging’ for foreign homebuyers