Mainland Chinese investors are turning their backs on the Australian property market due to a series of measures designed to cool one of the world’s hottest real estate markets. This dip in foreign investment heightens the risk of a damaging correction in house prices.
The federal and state governments’ latest moves targeting foreign investors mirrors similar measures imposed in other favoured destinations of Chinese investors, including Vancouver, Singapore, and Hong Kong. However, there are fears that our governments’ latest measures could push an already unstable market over the edge.
Sutono Pratiknya, a Sydney-based property sales consultant, said the new measures have sent a clear signal that overseas investors are no longer welcome.
“We used to do five property tours a month, picking up a dozen investors from the airport and showing them our latest offering. Now, there's nothing,” Pratiknya said.
With Aussie banks heavily reliant on mortgages, economic growth beginning to lag, and the Reserve Bank warning about households struggling with record amounts of debt, any sharp decline in house prices could put an end to Australia’s record 26-year recession-free run.
NSW’s new tax arrangements will see duties from home sales to foreigners rising to 8% of the purchase price, taking total taxes on overseas buyers to more than 13%.
While Australia isn’t alone in introducing foreign property taxes, the number and speed at which new policies are being introduced are spooking foreign property buyers. In just over a year, all the major east coast cities have introduced—and in the case of Sydney, expanded upon—foreign duties. The country’s biggest banks have also stopped lending to overseas buyers and the federal government has introduced punitive measures for foreigners who leave their properties vacant.
“The fact is that a lot of developments hinge on foreign investment,” said David Bare, the NSW executive director at the Housing Industry Association (HIA). “Applying these measures when the market is starting to cool is going to have a much greater effect than it might’ve 12 or 18 months ago.”
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