Speculation in and around the future of the Australian property market remains rife within this country. The increasingly expensive (relative to average earnings) property market is also an electoral issue, with some pressure now being exerted on politicians to restrict via legislation the ability for foreign residents to own property in this country. Foreign ownership of property is one of the usual scapegoats attributed to the cost of property ownership.
Notwithstanding the changes to foreign ownership, the Australian property market had rebounded from its slump earlier in the year, to be forecast to increase some 15% and reach a new record by March 20201. This growth was prior to COVID-19, however, notwithstanding the new market uncertainty, the Australian property market remains stable. Australian Government COVID-19 economic stimulus programs are ensuring that those with mortgages are receiving relief from their loan repayments until October 2020. This gives great stability to the Australian property market.
The new initiatives therefore restricting foreign ownership have not had the desired effect.
What are then these new changes to foreign ownership for property owners?
Foreign investors must seek foreign investment review board approval prior to purchasing a property. Application can be made on the Foreign Investment Review Board (FIRB) website.
Foreign investors are limited to a 60% loan to value ration on borrowings on property acquisitions; you cannot apply for a home loan without first being granted FIRB.
Foreign investors pay a premium stamp duty on the purchase of property in Australia.
Foreign investors pay a premium land tax on the purchase of property in Australia.
There is no capital gains tax discount or concession for new foreign investors on property, so if the property generates a capital gain, the investor will pay tax on this gain at marginal income tax rates.
There can be complicated rules governing the type of property you can acquire as a foreign investor, particularly if you wish to develop the property.
Unless you have a tax clearance certificate upon sale, the purchaser may be required to withhold 12.5% of the purchase price and pay it to the Australian Taxation Office.
Notwithstanding the difficulty pertaining to foreign ownership of property in Australia, the jurisdiction is still attracting a lot of foreign investment. The robust returns, low Australian dollar (versus $USD) and relative stability of the geopolitical environment still make it an attractive place to invest, even with the current international economic uncertainty. Indeed, much like New Zealand, there’s never been a better time to be an island.
Corelogic Home Value Index – Australian Financial Review December 2nd 2019
1 Corelogic Home Value Index – Australian Financial Review December 2nd 2019