THE AUSTRALIAN FINANCIAL REVIEW
The near-doubling of a new tax on foreign residential property investors in Western Australia has been criticised by development and property experts, who claim it will slow economic
recovery.
The recent state budget increased a residential foreign buyer tax from 4 per cent to 7 per cent before the commencement date next January in a bid to raise another $123 million in revenues over four years.
Allison Hailes, chief executive of Urban Development Institute of Australia, said the move would “stifle” foreign investment jeopardise market recovery, undermine creation of new jobs and slow economic recovery.
Perth property prices led the nation until the downturn in demand for minerals and have since dropped behind the eastern states because of oversupply, rising unemployment and loss of booming mining company profits.
But there have some recent signs of improvement as the economy picks-up and bargain hunters invest in a cheaper market, according to analysis by SQM Research, which monitors apartment and house prices. For example, Perth house prices have increased by about 3 per cent during the past 12 months, compared with a fall in Sydney.
The WA government claims the tax increase will bring the state into line with the rest of Australia “at no cost”. Matthew Cridland, tax partner at K&L Gates, said: ‘*WA has missed an opportunity to distinguish itself from the eastern states. It should be promoting Perth and WA as the only major destinations in Australia for residential investment without a surcharge.”
Mr Cridland said lower taxes would be particularly attractive for Asian investors who send their children to Australia for education.
“Eastern states with strong housing markets impose high surcharge rates and have the option to reduce those rates if their markets cool,” he said.
“WA’s market has been stagnant and is now only seeing green shoots. It risks slowing that record if foreign investment is further discouraged.”
UDIA’s Hailes said WA being one of the only states not to have a foreign buyers surcharge is a “huge competitive advantage”.
‘The residential property market in WA plays a major role in supporting our struggling state economy and this new tax on foreign investors will have a negative impact in the long run,” she said.
Ms Hailes has called on the government to rethink its policy and drop the tax. “Without foreign investment into WA’s property sector we are likely to see further job cuts and less money flowing into the state’s economy.”