Leading Australian developer Crown Group is calling on the NSW Government to extend its recent overhaul of stamp duty and land tax so that foreign buyers are exempt from the payments, in a bid to reignite the new apartments market.
Crown Group Chairman and Group CEO Iwan Sunito said that prior to COVID-19 the apartment market had already softened due to new lending restrictions and the application of excessive foreign buyer stamp duty.
Since the pandemic had hit, the closure of international borders had brought foreign investment in local property to a virtual stand-still.
“The NSW property market needs foreign buyers and global investors to come back again since they contribute to about 50 per cent of off-the-plan purchases of inner-city apartments. Otherwise the construction industry, and therefore jobs, will suffer,” he said.
Mr Sunito supports the move this week by NSW Treasurer Dominic Perrottet that proposes an overhaul of the state’s centuries-old stamp duty tax, whereby home buyers can choose to pay either stamp duty and land tax or a new smaller annual property tax.
Mr Perrottet’s office issued a statement saying it wants to “help the people of NSW achieve the Australian dream of home ownership and grow the NSW economy” and that stamp duty was one of the biggest financial barriers to home ownership.
But Mr Sunito said that during COVID, when the jobs market was in dire need of revival, we should follow the model rolled out in the UK, where all home buyers, including those who are non-UK residents, have been given a temporary reprieve on stamp duty on purchases made during COVID’s worst months. The UK rule applies between 8 July 2020 and 31 March 2021.
“Overseas arrivals in Australia have practically ground to a halt since COVID hit and international student arrivals have dropped 80 per cent – and these are two of the major drivers of the apartment market in Australia,” Mr Sunito said.
There are already 210,000 fewer international students in Australia than usual, since Australia shut its borders on March 20, according to Department of Home Affairs data released this week, which could cost the Australian economy up to $20 billion in lost spending.
“The majority of Crown Group’s overseas buyers have traditionally been motivated by two factors – – they are buying homes for their children so they can study in Australia or they are investing in Australia since they believe in the strength of its economic fundamentals,” Mr Sunito said.
“Having borders closed and flights grounded has tightened the demand from both those groups. We believe that if some of the financial barriers such as stamp duty are removed, it will motivate them to buy now, in preparation for when they are again able to travel to Australia.
“We call on the Government to waive stamp duty for foreign buyers now. There are no current incentives in the market today that encourage people to buy off-the-plan and thus to encourage the construction of new apartments, which are vitally needed in major cities.”
In the financial year 2018-2019 overseas buyers spent $88 billion on homes in Australia according to FIRB – the majority of them new homes, because of the tax structure.
“If you take out those $88 billion in purchases, you will see a serious dent in the number of new homes being built, with serious detriment to Australia’s construction industry, and of course, that means fewer jobs,” Mr Sunito said. “We want to keep the construction industry afloat.”