Foreign investors in Australian residential property are paying multiple times the amount in stamp duty paid by local owners and investors, according to a report which also suggests that Australians are paying more than $20,000 in stamp duty on average homes and investment properties which they buy.
Released by Housing Industry Association, the latest report suggests that foreign purchasers of a median priced unit or apartment in Sydney as of July ($747k) were required to fork out $93,865 in stamp duty and other transaction taxes.
This equates to more than three times the $29,105 which local owners/investors paid on an equivalent property and added around one-eighth of the cost of the acquisition over and above the purchase price.
Non-residents in other states are also being slugged.
Compared with the $26,870 and $12,145 paid by local purchasers paid for average units (530k and $392k) in Melbourne and Brisbane, foreign purchasers would be required to pay $68,970 and $28,905 on these same units respectively.
The latest report comes as cash-strapped governments around the nation rush to follow the lead set by Victoria in 2015 and raise money by levying special stamp duty surcharges on foreign purchases which are applied over and above any duties paid by regular investors.
In New South Wales and Queensland, surcharges equivalent to eight percent and three percent of the purchase price have applied since July 1 2017 and October 1 2016 respectively.
Victoria, meanwhile, levies a surcharge on foreign property investment of seven percent whilst South Australia has announced its intention to levy one of four percent as at 1 January next year.
In addition, foreign investors who wish to purchase residential property in Australia are forced to pay a $5,000 application fee to the Federal Government in order for their application for permission to purchase the property to be processed.
From the viewpoint of governments, targeting foreign investors is seen as a politically harmless (and arguably, politically beneficial) method by which to raise much needed cash.
This can often be applied toward politically beneficial means, such as first home buyer concessions.
Governments have also argued that surcharges against levied on foreign property investors help to correct an inequity which arises out of the fact that foreign property investors benefit in terms of property values from infrastructure provision which is funded by local Australians through income taxes.
Nonetheless, industry lobby groups argue that purchases of foreign property represents an important source of new housing supply.
Under current rules, investors wishing to purchase residential property in Australia are generally barred from purchasing established dwellings except for where they themselves wish to use the property in question as a place of residence whilst in Australia.
These rules are designed to ensure that any purchasing activity by foreign investors adds to overall housing stock levels rather than taking properties away from potential local owners.
In an additional requirement introduced to ensure that foreign property purchasing adds to local rental supply, foreign owners who leave their properties empty for more than six months in a year now face a special vacancy charge.
Partly because of these requirements, property industry lobby groups argue that the additional impost upon foreign investors is jeopardising the supply of available rental properties.
Rental vacancy rates in Sydney and Melbourne stand at a tight 1.8 percent and 1.5 percent respectively, HIA says.
Any taxation impost which is levied upon foreign buyers discourages investment in critical rental stock, the housing group argues.
Outside of foreign investment, HIA says the burden of stamp duty amongst ordinary Australians is growing.
Whilst dwelling prices have risen by an average of 10.5 percent over the past year, HIA says the design of stamp duty means that the average burden associated with this tax has actually increased by 16.4 percent and now sits at $20,725.
With a typical 30-year mortgage, HIA puts the additional mortgage costs associated with stamp duty at $104 per month – an impost it says has a detrimental impact upon labour mobility, economic activity and household cash flow.