WA property owners have been given a reprieve, with no increases to property taxes in the State Government 2017-18 budget.
However, the Government is planning to introduce a 4 per cent foreign owner duty surcharge on purchases of residential property by foreign individuals and entities from 1 January 2019.
This is expected to create $49 million in revenue by 2020-21.
Industry bodies have welcomed the government’s assurance that the local property sector would not be taxed to assist in budget repair, but expressed concern over the foreign owners surcharge.
REIWA deputy president Damian Collins said given the government had faced challenges when it came to the State’s fiscal position, it was pleasing to hear there would be no increases to property tax for WA residents, but a tax on foreign buyers would impact the market.
“The introduction of a new foreign owner duty surcharge could hinder overseas property investment,” he said.
“Despite foreign investors only representing a small proportion of the WA property market, caution must be placed to ensure this section of the market does not reduce further.
“The government expects to create revenue from this surcharge, however, it may only worsen the situation in terms of transfer duty revenue, as potential foreign investors may be less incentivised to purchase residential property in WA.”
The Urban Development Institute of Australia (UDIA WA) chief executive Allison Hailes was pleased to hear Treasurer Ben Wyatt recognised the property industry had been a soft target in previous years when it came to seeking increases in revenue.
“Despite these assurances, we do think that the new Foreign Owner Duty Surcharge will have a more significant impact on demand for property in WA than what the government might anticipate,” she said.
The surcharge in WA applie to purchases of residential property by foreigners, including individuals, corporations and trusts.
It excludes residential developments of 10 or more properties, commercial residential property such as hotels, student accommodation and retirement villages, and mixed use properties that are used primarily for commercial purposes.
“While the surcharge conditions have been amended since the government announced it a few months ago, it is now directly targeting residential property transactions,” Ms Hailes said.
“If you look at the finance requirements for up to 50 per cent pre-sales for large apartment developments, a lot of that initial demand can come from foreign buyers.
“These buyers might be looking for accommodation for their children while they study, or to live in themselves, either way, adding a cost to that investment may be a turn off for potential buyers.
“Here in WA, we should be encouraging foreign buyers to invest in our property market and help in the overall market recovery, we certainly shouldn’t be penalising them.”
The UDIA welcomed the investment in Metronet and the associated potential that the new rail lines would provide in terms of urban precincts around the new stations.
“The improved connectivity and the unlocking of the potential for increased density and the creation of vibrant community hubs around these precincts is very exciting,” Ms Hailes said.
“Property owners in existing areas will also benefit from the improved connectivity and amenity and services that these precincts could provide.”
Both REIWA and the UDIA would have liked to see the government address the issues of housing affordability in WA.