New Victoria Foreign Buyers Tax? No Problem

On July 1, the new, higher foreign buyers stamp duty took effect in Victoria. Foreign buyers now pay eight per cent additional stamp duty on their residential real estate purchases, rather than the seven percent they have paid over the past two years.

Will the higher tax make a tremendous difference on the market? The answer is no. It is discouraging but not too damaging. There is an old saying to the effect that those who can’t vote, pay.

Victoria is the number one destination for Chinese buyers in Australia, leading Sydney by a wide margin. The fact that prices in Victoria are lower than in Sydney is one reason for that.

It’s not just offshore Chinese who are buying in Victoria. Even some mainland Chinese who have settled in Sydney are packing up and moving down to Melbourne. They can buy a new house and land package within 30 minutes of the Melbourne CBD for the price of a one-bedroom central Sydney apartment. It’s a more affordable place to raise your family.

Victoria’s government has also been savvy about its stamp duty increase. Even after the one per cent increase, the foreign buyers now pay exactly the same tax in Victoria as they have been paying in New South Wales for more than two years.

The other big political news lately is the recent national election and the new Parliament that began sitting on the first of July. We believe the Coalition’s victory in the election will have a positive impact on Chinese real

estate investment. conducted research just before the election, surveying dozens of members of the property industry from across Australia. The study found that a significant share of the industry believes the Coalition victory will mean more Chinese investment, while a Labor victory would have meant Chinese investment would fall. Will Chinese buying triple overnight just because Scott Morrison has the keys to the Lodge? No, but there may well be a real impact.

Our core case for 2019 is for Chinese investment to be flat, with risk on the upside. That may not sound too exciting, but flat demand is much more impressive when you realize that demand has been plummeting for two years. Flat demand represents a massive change in momentum and could be the beginning of something better.

Of course, Chinese buyers are still the biggest spending foreign buyers in the market, according to the Foreign Investment Review Board. It is just that they are not buying with the same hyperactivity as three years ago.

When ranked by Chinese buyer demand, the top Australian cities in the first half were

Melbourne, Sydney, Brisbane, Adelaide, and the Gold Coast, followed closely by Perth in sixth. Melbourne and Sydney together in 2019 account for 52.3% of buying enquiries.

The cities with the fastest growing levels of Chinese buyer interest are Hobart, Brisbane, and Canberra. Hobart has the fastest rate of Chinese buyer growth, with 77% more buyer enquires in 2018 than the year before. Brisbane has the second fastest rate of Chinese buyer growth, with 30.8% more Chinese buyer enquiries in 2018. Canberra has the third fastest rate of Chinese buyer enquiry growth in Australia, with 24.6% more Chinese buyer enquiries than the year before.

Remember that all three of these smaller cities receive significantly less buyer interest than do Sydney or Melbourne. That’s especially true of Hobart and Canberra, which still account for only a small share of Chinese buyer interest. Brisbane, though, is fast becoming a real alternative for the two traditional gateway cities of Melbourne and Sydney.

Carrie Law

CEO and Director