Written by Stefan Kostarelis
Real Estate Institute of South Australia CEO Greg Troughton has spoken out against a new stamp duty that will affect foreigners buying property in South Australia.
In an article for The Advertiser, Troughton called the hike in stamp duty one of the most cynical moves he had seen in many years.
Troughton identifies Adelaide’s solid 4.5 percent growth in capital values as a promising allure for interstate and overseas investors who are looking to put their money somewhere other than the skyrocketing eastern states.
Troughton also feels that the state government is hypocritical for taking foreign investment to create jobs but discouraging the purchase of property.
“Live work and play here in SA but don’t buy” is the message to any foreign company thinking of investing here and setting up shop here to look after their investment.” Troughton wrote.
SA Treasurer Tom Koutsantonis revealed his fourth budget last Thursday.
The new stamp duty law states that if you are a foreign purchaser of residential land in Australia, from January 1st , 2018 you will be required to stamp duty surcharge of 4% of the dutiable value of the property.
The SA government defines a foreign purchaser as a person who is not an Australian citizen, permanent resident or New Zealand citizen who holds a special category visa.
The new stamp duty also won’t just apply to individuals but also corporate entities and trusts.
The SA government defines a foreign corporation as one that is incorporated outside Australia or where at least 50% of its shareholding is held by foreign persons, companies or trusts.
A foreign trust is defined as one in which the trustee, a person who has the power to appoint under the trust or a person who takes capital of the trust property is foreign.
The SA state budget adds to measures in May’s Federal Budget, which also cracked down on foreign investors.
In the Federal Budget, it was announced that new developments will be subject to a 50 percent cap on foreign investment approvals and that capital gains tax rules would be tightened.
A so-called “ghost tax” was also introduced for foreign buyers who leave properties they own vacant for at least six months of the year.
So by further discouraging foreign purchasers of property, how much does SA stand to lose?
Potentially a lot.
A recent post by Tianchan quoted figures from the Foreign Investment Review Board that shows Chinese interests spent $960 million dollars on SA real estate in 2015. That’s almost double what was spent in 2014 ($530 million).
And that’s just Chinese investors. We also have to consider other places in the top ten such as the USA, the UK, New Zealand and Europe.
For those concerned that SA will become overrun by foreign purchasers and experience a housing bubble, Troughton says there are already ample protections in place to prevent that.
“This state must remain open to investment and the creation of local jobs to keep our next generation here in SA,” he concluded.