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Announced in Queensland’s state budget on 11 June, the state’s Treasurer Cameron Dick said that the foreign owner transfer duty surcharge would be aligned with that of NSW and Victoria, at 8 per cent.
A recent statement from the Property Council of Australia has criticised the international capital tax regime, labelling the move “cash-grabbing” and “investment-killing”.
“These apartment-killer taxes were sold to Queenslanders as a solution to a perceived influx of overseas buyers looking to crowd them out of housing, but in reality, they’ve put the handbrake on housing delivery all together,” said Property Council of Australia’s Queensland executive director Jess Caire.
“These ill-considered taxes have only worsened Queensland’s housing issues by driving away the global capital that backs Australian-based developers who deliver new homes at scale and bring community-building projects to life.
“The almost 33,000 homes that could have been built over the last eight years would be more than enough to house the population of Rockhampton.”
Supporting the council’s staunch views on the matter is the Real Estate Institute of Queensland (REIQ), with CEO Antonia Mercorella claiming the move is a detriment to the housing market in the state.
“The REIQ does not endorse a measure that is designed to limit investors buying and building housing in Queensland, whether they are local or foreign. These taxes effectively close the door on being able to access foreign funds, when there’s not enough private capital in Australia alone to fuel the housing development that’s desperately needed,” said Mercorella.
“Our view is that Queensland’s housing market would ultimately benefit from increased investors’ activity and developer capital, and when measures are introduced to limit that potential, it’s concerning. These punitive measures rob capital from local builders and developers who are instrumental in delivering new housing supply and this leads to downward pressure on approvals and shortfalls in housing.”
According to Caire, international investment has dropped 83.9 per cent since the tax regime was introduced in 2016, reportedly resulting in the state losing out on $17.8 billion in housing investment and between 21,129 and 37,972 Queensland jobs.
“Many of the companies that rely on international capital to fund their projects are household names, have been based in Queensland for decades, and employ thousands of Queenslanders,” Caire said.
“So not only have these taxes killed off homes, but they’re also killing off Queensland jobs. Ironically, the state has also lost out on revenue to the tune of nearly $100 million in stamp duty and land tax since the introduction of these taxes.
“It’s no wonder boardrooms around the country, and the world, are looking at Queensland and shaking their heads in disbelief, because despite all the promise and potential, the state’s tax settings are effectively a big ‘you’re not welcome’ sign to institutional capital.”
Despite the passionate arguments made by the Property Council and REIQ, others view the decision with more optimism. Dr Diaswati Mardiasmo, chief economist at PRD Real Estate noted the potential to do good through this legislation.
“There has been much discussion about this at both federal and state levels. On one side, much of foreign investor surcharge was used to stop individual foreign buyers from pushing out Australian residentials from the property market. However, the broad application of these taxes is capturing Australian-based developers – especially those who use a proportion of international capital or who are owned in part by international entities,” she said.
“In the current construction challenged world, where many companies are questioning financial viability of projects and wanting to minimise risk, partnering with international capital is an important component. Especially on alternative stock such as build to rent towers, retirement living homes, purpose-built student accommodation, and mixed-use projects that combine apartments and commercial office developments. Specifically for things like build-to-rent and student accommodation, where many of the key providers are international players/foreign companies.
“So definitely there is argument for – more capital for our construction industry, increasing the financial viability of projects and thus more housing supply, and more international individual investors in the market (which then leads to more rentals, as these owners do not live in Australia). On the other side however, there does need to be some consideration and controls on the relaxing of taxes, to ensure that it is still to our benefit. We know that taxes are a source of income for the government, which is then filtered through to fund other services (i.e. infrastructure, health, education, welfare, etc). Therefore, we still need to ensure that there is a balance in terms of tax revenue (with other taxes), so that the provision of Australian services is not compromised.”
Mardiasmo said that international investors are only able to access new products, safeguarding the second-hand property market. In some instances, she said, foreign investment can benefit domestic buyers.
“Having foreign investors gives more certainty that the new project will go ahead (as some banks still require 70 per cent and above pre-sale before finance), which positively impacts domestic buyers too (otherwise, those extra 100 apartments might not be built). However, it is reasonable for people to worry about how it will impact domestic buyers. There are safeguards that can be placed here – for example no more than 50 per cent sold to foreign investors,” she said.
“Overall there is definitely reason for reducing foreign investor surcharge, while at the same time placing safeguards to ensure that it is to the benefit of our people.”
[Related: Foreign buyer housing market share drops]
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