What does higher foreign buyer fees mean for the real estate industry in Sydney, Melbourne, Brisbane, and Perth?
Australia has doubled the fee it charges foreigners when they apply for permission to buy property from 1 August. If you are buying an Australian home worth AU$2 million, your application fee will now be about $26,400.
What does this mean for the real estate industry in Sydney, Melbourne, Brisbane, and Perth?
To cut to the chase, the impact won’t be great.
The increase in foreign buyer application fees won’t have a significant deterrent effect on Asian buyers of Australian real estate. It’s just another relatively small transaction cost, and perhaps one buyer in 50 might be discouraged.
Buyers of a $5 million residential home will pay an application fee of $105,600, or about 2% of the purchase price.
Source: Juwai IQI, Foreign Investment Review Board
The Australian government says the fee is designed to recoup the cost of reviewing each application. More importantly, it aims to raise revenue that the government can spend on other things, like making housing more affordable.
The Treasury estimates the fee increase will earn the government nearly a half-billion dollars over the next four years. That’s in addition to the fees already charged.
Oh not everyone agrees to me that the impact on foreign residential property buyers will be minimal. However, we work with foreign buyers in mainland China, Hong Kong, Malaysia, Singapore, and other parts of Asia. We just don’t see a significant impact.
Australia isn’t alone in charging foreign property buyers stamp duty and application fees. Consider Singapore, which is another tough market for cross-border property investors in Asia. The city state now charges foreign buyers a 30% stamp duty, up from 20% last year.
Nor is Australia trying to discourage foreign investment. In fact, they are between a rock and a hard place. On the one hand, they need to raise revenue. On the other, they have promised not to raise taxes. That’s why they are doing things like increasing the foreign buyer application fee.
Foreigners invest some AU$10.4 billion in Australian residential real estate per year in more than 4,000 transactions. We see that climbing in the years ahead.
Opinion piece by Juwai IQI Co-Founder and Group Managing Director Daniel Ho.