Striking the iron while it’s hot might take on another meaning when it comes to the Australian authorities putting pressure on the real estate sector after months of consistent price-rises with a series of property cooling measures.
The most recent move by the New South Wales state to increase foreign-buyers stamp duties may come at the right time, just as the property market shows signs of cooling. Stamp duties on new home sales to foreign property buyers have risen to 8 per cent of the purchase price. As many new projects are targeted at overseas buyers, the sector may see a major and possibly immediate readjustment of expectations and yields. With the recent tax hike, overseas buyers will now pay 13 per cent of the total purchase price of a property or more in taxes.
Chinese investors are particularly anxious about the recent change as they have formed one of the largest pool of foreign monies from which Australia’s real estate sector draws from. Citizens have expressed concern about the rising housing costs and like most other destinations for mainland Chinese such as Vancouver, Singapore and Hong Kong, property cooling measures have been put in place to curb just that. Banks have also ceased foreign lending and the federal government has placed punitive measures on foreigners who leave their purchased properties vacant.
The risk of introducing more property curbs in current times are nevertheless ever present, especially as Australia has just had a record 26 years of being recession-free. Sharp falls in housing prices may change all that.