Foreign buyers continue to hunt for local property

From

Josh Chye

Interest from foreign investors in Australian property, including residential, remains strong despite the impact of lockdowns and property tax rates, according to HLB Mann Judd Melbourne partner, Josh Chye.

Mr Chye said demand from markets including Singapore, Hong Kong and Malaysia remains strong and, if anything, has been increasing

“New enquiries from mainland Chinese investors have scaled back significantly but other parts of the Asia Pacific region, including Singapore and Hong Kong, are consistently strong and Australia remains an attractive jurisdiction despite the relatively high taxation rates.

“This provides strong support of Australia’s property market despite concerns about rising interest rates or an economic downturn,” Mr Chye said.

Australia has one of the highest – if not the highest – rates of taxation in the region, at both the individual and corporate level. As a comparison, Australia’s personal tax rate of 47 per cent is more than double of Singapore’s rate of 22 per cent almost triple the rate of Hong Kong’s rate of 17 per cent.

“We also have higher than average tax costs for foreign buyers of real estate than our global neighbours, including on land tax. This has increased consistently over the past seven to ten years at both the state and Federal level, and the additional impost is a burden for foreign investors in real estate.

“This has created some concern and frustration among these buyers as there has been limited industry consultation on the tax increases. When these buyers look to acquire a project, the numbers they put in might change and the costs for stamp duty or land tax may significantly – and unexpectedly – increase,” he said.

“While the high tax rates are a consideration for many foreign buyers, this is balanced by the fact that Australia remains a stable jurisdiction for real estate investors. Price growth, particularly in Sydney and Melbourne, has also driven interest from foreign buyers.

“However, if there continues to be a trend of continued tax increases or removing of tax concessions solely focused on foreign investors, this will no doubt hurt Australia’s reputation and standing as a stable jurisdiction for foreign investors into Australia and other markets such as United States, Canada and the United Kingdom will increasingly look more attractive as also alternative destinations for real estate investments.”

“Prices have increased significantly over the last 18 months and there’s still no doubt Australia and its major cities are a huge attraction for foreign investors whether it be for business or personal reasons.

“The recent harsh lockdown restrictions in China have created more interest in investing here. The key challenge is not the desire but the ability for foreign capital to be physically transferred here, as certain countries have tightened their controls around money leaving the country,” he said.

Mr Chye said the current uncertainty in global markets is also unlikely to dampen interest in Australia property assets.

“Inflation and interest rates increases are common across the globe so if rates go up, it will put pricing pressure on property, however the demand will still be there.

“The pricing pressure will be global so from that perspective, it should not detract from investors looking to acquire Australian property assets,” he said.

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