The state government will not consider pausing or scrapping its surcharge on foreign property purchasers, despite a sharp reduction in sales to offshore buyers and growing scepticism around whether revenue will meet projections.
The state government will not consider pausing or scrapping its surcharge on foreign property purchasers, despite a sharp reduction in sales to offshore buyers and growing scepticism around whether revenue will meet projections.
In January, the McGowan government instituted a 7 per cent tax on all offshore purchasers of property in Western Australia, bringing the state in line with other jurisdictions around Australia.
The impost was introduced despite widespread consternation from property industry associations, which argued that with Perth at the low point of its property cycle, the timing was not right to introduce a new tax that had the potential to stifle sales.
Property Council of Australia WA executive director Sandra Brewer said similar imposts were introduced in other states as market-cooling mechanisms, to deal with a massive influx of offshore capital, particularly from China.
Ms Brewer said those taxes had achieved their purpose, but that the impost introduced in January in WA had also slowed sales significantly.
The tax has also reportedly forced Hong Kong-headquartered Far East Consortium to press pause on its $1.4 billion Perth hub project, following a dramatic plunge in sales after its introduction.
“We are hearing significant drops in sales, for one of Perth’s leading apartment developers, the number of foreign buyer sales year to date, compared to the previous period, has declined by 70 per cent, year on year, and for another developer, they have experienced a drop of 88 per cent in quarter on quarter sales,” Ms Brewer told the Office Hours podcast, part of the Business News podcast network.
“That’s far steeper than any domestic sales changes.”
“The flow-on effects are serious, most of our foreign buyers are from Singapore or Malaysia, and they are often families with students studying here at universities and colleges.
“They might as well just study in Sydney or Melbourne because Perth doesn’t have that advantage any more that we had.”
Urban Development Institute of Australia WA chief executive Tanya Steinbeck echoed Ms Brewer’s concerns on the Office Hours podcast.
“We have heard very similar feedback to what Sandra has from a developer’s perspective – there has been a significant drop-off in enquiry and sales from an international investment perspective.
“It’s not creating a significant amount of revenue for the government in the whole scheme of things.”
Ms Steinbeck said the industry had been keen to scrutinise the impact of the impost in the recent state budget, however, the revenue raised from the tax was included in total transfer duty and not specified.
"I think the reason why it was buried in the budget papers is because it shows they were not getting any revenue, whereas in the previous budget, it was a budget commitment so it was highlighted," Ms Steinbeck said.
"I think we are right to be a little bit sceptical in terms of how much this is going to generate, and if the McGowan government is committed to tourism and attracting international students and things like that, then that’s one of the key things in terms of securing property for student accommodation that drives that investment.
"So putting a tax on it, when that was in fact probably our unique value proposition for Perth as opposed to other states, I think was poorly timed."
A spokesperson for Finance Minister Ben Wyatt told Business News following the budget release that in the period from January 1 to May 14, the state government raised around $4.2 million from the surcharge.
The government had originally expected to raise more than $120 million over four years when it introduced the tax, however, the spokesperson said that number had been revised down significantly in December’s mid-year budget review.
The spokesperson said the state government expects to raise $20 million in 2019-20 from the tax, and is not considering any changes.
“Foreign investment in housing is driven by a range of factors which have a much greater impact on market outcomes,” the spokesperson said.
“It remains the position of the WA government that foreign property speculators should contribute to budget repair.”
