All Topics / General Property / Game changer For Property Investors

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  • Profile photo of Steve McKnightSteve McKnight
    Keymaster
    @stevemcknight
    Join Date: 2001
    Post Count: 1,763

    A game changer has been announced that will impact Aussie property investors, particularly those in Victoria.

    Earlier today, the Victorian Treasurer – Tim Pallas – announced that from 1 July foreign purchasers of Victorian real estate will pay the normal stamp duty PLUS an extra 7% of a property’s value. It should be noted that this is an increase (to 7%) from the the already imposed 3%.

    As an example, an Aussie citizen buying a $700,000 home in Victoria would pay stamp duty of $37,070. A foreigner buying today would pay $58,070. A foreigner buying after 1 July 2016 will pay $86,070. That’s 12.29% of the purchase price. Ouch.

    There is also a nasty little increase to land tax too for ‘absentee owners’ – an increase from 0.5% to 1.5%

    Although the Treasurer spruiked that Victoria is the favoured place for foreigners to park their money, the Australian Financial Review reports that “Purchases of new properties in Victoria by foreign buyers fell to 10.7 per cent in the three months to March from 32.5 per cent in December 2014.”

    Why is this newsworthy?

    Well, it seems the lessons of the failed NSW government attempt in 2004 to slug all property owners with a exit stamp duty of 2.25% have been ignored. All that did was pour cold water on the property market and create a political stench that still lingers in the nostrils of NSW property investors.

    Economics 101 says if you increase the cost of business, that business will move to a more efficient (cheaper) market. In this case, anywhere other than Victoria. Take away that demand and unless the number of houses available for sale diminishes too, price must fall. But hang on… there has been a glut of new apartments approved over the past 12 months, so the supply pipeline is gushing and now demand has been throttled back! Nuts! Victoria loses, everywhere else wins.

    That said, there may be a scramble for foreigners to sign up contracts between now and 1 July so as to only have to pay a 3% surcharge. Developers better fire up their marketing campaigns fast.

    The property market in Victoria is already peaking. A dumb announcement like this may result in some political high fives by the boffins in the bowels and back rooms of Parliament, but for those in the real world, this will hurt sentiment and push buyers to other markets.

    You heard it here first.

    – Steve McKnight

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
    https://www.propertyinvesting.com

    Success comes from doing things differently

    Profile photo of D.T.D.T.
    Participant
    @dtraeger
    Join Date: 2014
    Post Count: 128

    Good post Steve.
    We’ve been seeing some extra interstate and international interest in Adelaide of late.

    D.T. | DT Property Management
    http://www.dtproperty.com.au
    Email Me | Phone Me

    Adelaide Property Management - whole Adelaide metro

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Hi Steve

    Very informative. Brisbane and SE Qld is still crazy with enquiries from locals outside Qld as well as expat’s / non residents and this can only increase going forward.

    Cheers

    Yours in Finance

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me

    0-40 Properties in a decade with an unencumbered value of over $35M. Email for a copy of my API article

    Profile photo of Corey BattCorey Batt
    Participant
    @cjaysa
    Join Date: 2012
    Post Count: 1,010

    Just another reason to not invest in OTP/high density property in these markets – as they’re propped up by a distorted market which only allows overseas investors to buy one type of property.

    I can’t see this causing an overall major impact on the rest of the Vic/Melb market – meanwhile its a tax increase that the government can put in to spur revenue whilst giving the impression of targetting housing unaffordability issues. No surprises here whatsoever that the government has put it forward.

    Corey Batt | Precision Funding
    http://www.precisionfunding.com.au
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    Investment Focused Finance Strategist - servicing Australia-wide

    Profile photo of DeanCollinsDeanCollins
    Participant
    @deancollins
    Join Date: 2015
    Post Count: 376

    what the heck is an ‘absentee owners’

    Profile photo of D.T.D.T.
    Participant
    @dtraeger
    Join Date: 2014
    Post Count: 128

    what the heck is an ‘absentee owners’

    People who live in a different place to the property they own (ie investors)

    D.T. | DT Property Management
    http://www.dtproperty.com.au
    Email Me | Phone Me

    Adelaide Property Management - whole Adelaide metro

    Profile photo of DeanCollinsDeanCollins
    Participant
    @deancollins
    Join Date: 2015
    Post Count: 376

    what the heck is an ‘absentee owners’

    People who live in a different place to the property they own (ie investors)

    Thanks DT….is that seriously how the Vic government describes investors… as “Absentee”.

    Doesn’t sound very investor friendly to me……

    Benny
    Moderator
    @benny
    Join Date: 2002
    Post Count: 1,416

    A good question from Dean Collins:-
    what the heck is an ‘absentee owners’

    There is also a nasty little increase to land tax too for ‘absentee owners’ – an increase from 0.5% to 1.5%

    Was that a sudden switch from “overseas investors” being affected to become “interstate investors” now being affected? Or, could a Victorian investor from Ballarat be an “absentee owner” if they buy in Melbourne?????

    Just how far-reaching IS that quoted Land Tax increase? It fully depends on the Govt’s definition of “absentee owner”.

    Oh, by the way – that is not a 1% increase, now is it? Nope, it is a 200% increase !! So it certainly has sharp teeth, and is looking like it could affect huge numbers of investors (depending on that definition that Dean asked about).

    Benny

    PS Thanks for the warning Steve !!

    Benny
    Moderator
    @benny
    Join Date: 2002
    Post Count: 1,416

    From the SRO Vic website :-
    If you ordinarily reside in Australia, you are not an absentee individual.

    So, it seems this “absentee owner” is NOT everyone who is a landlord (thank heaven). The SRO has a few more tests to check though, as even a citizen or resident MAY be absentee if they are out of Australia for large periods of time.

    Check the situation for yourself – here:-
    http://www.sro.vic.gov.au/node/1873

    Benny

    Profile photo of DeanCollinsDeanCollins
    Participant
    @deancollins
    Join Date: 2015
    Post Count: 376

    Check the situation for yourself – here:-http://www.sro.vic.gov.au/node/1873
    Benny

    Thanks for posting this.

    Interesting that “you must self register” eg no way for govt to track if you don’t register…..

    I find it very curious when govts expect you to know the rules but make no effort to reach out to you and say hey….we understand you own this and please pay xyz etc.

    How is an offshore investor even supposed to know about this change if the govt doesn’t reach out to let them know?

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