Western Australia’s newly introduced foreign-buyer tax would not help the state’s property market, said a senior official from the Reserve Bank of Australia (RBA).

The surcharge would have possibly helped in taking the edge off in periods of very strong growth, but that was not the case for WA’s current market, according to RBA Assistant Governor Michele Bullock.

“I would only observe that given the WA market was not particularly buoyant to begin with, putting a tax on it wouldn’t seem to help that circumstance,” Bullock said during an Urban Development Institute of Australia (UDIA) WA event.

Under new levies, foreign investors are required to pay a 7% surcharge on residential property purchases in WA. The plan is expected to raise about $120 million over the next four years to boost WA government coffers, according to an article by realestate.com.au.

UDIA WA has been against the surcharge. In 2018, the industry group called for the move to be deferred until the market has retreated from its current downturn.

UDIA WA Chief Executive Officer Tanya Steinbeck said the institute understands the government’s decision to augment WA’s budget in the short term, but the modification on foreign-buyer tax would unpleasantly affect the market in the longer term.

“We are yet to see serious signs of a recovery and, given foreign investment in the property market is integral to the success of the market and the wider WA economy, we have strongly urged the government to remove the tax as it directly detracts from new investment in WA property,” Steinbeck said

The central bank also encouraged banks to ease the tightened lending standards, according to Bullock. This is an initiative that is well supported by UDIA.

“Given more positive population growth projected moving forward, UDIA is certainly expecting a return to more positive growth in the property market in the next 12 to 18 months. WA is on the precipice, and it will take all stakeholders including government, banks, and industry working together to create a supportive environment for growth,” Steinbeck said.