‘Property tax hike in Sydney won’t affect M’sian developers’

KUALA LUMPUR (June 15): The expected higher taxes for foreign buyers of residential properties in the Australian state of New South Wales (NSW) are not expected to have much effect on Malaysian developers there, say analysts.

NSW Treasurer Gladys Berejiklian was reported yesterday as saying that foreign buyers will have to pay a 4% stamp duty surcharge from next week and an extra 0.75% land tax from January 2017. The changes are expected to be announced in next week’s NSW budget.

Based on Sydney’s (pictured) median house price of A$995,804 (RM2.99 million), the stamp duty bill for a foreign investor will increase by almost A$40,000 — from A$40,305 to A$80,137 — according to The Sydney Morning Herald.

And if they are buying a unit at Sydney’s median price of A$656,000, they will pay an extra A$26,240 in stamp duty, the paper said.

“If you ask most economists, they would say people who are going to invest in these houses, who are foreign investors, are going to do it anyway,” Berejiklian was quoted as saying when announcing the increase.

An analyst with a local brokerage here agreed, saying the market is not expected to be affected.

“There should be no impact on Malaysia’s property developers who have property projects in Australia,” added the analyst.

He also pointed out that most Malaysian property developers’ projects are located in Melbourne in Victoria state, which has already imposed a tax on foreign buyers.

Victoria, Australia’s most densely populated state, has raised its tax on foreign purchases of residential property to 7%, from the existing 3%. The new tax will come into effect in July.

In addition to the higher rate, Victoria will also triple the surcharge on “absentee landholders” to 1.5% from 0.5%, effective from the 2017 land tax year.

In view of this, another property analyst does not see the 4% stamp duty surcharge in NSW curbing foreign buying.

“I do not think [a] 4% tax rate will create a major deterrent to cause slower property sales there. I believe foreigners are paying all kinds of taxes on their purchases currently,” the analyst said, noting that Singapore is charging a 17% to 18% tax on foreign buyers.

Nevertheless, a bank-based analyst is of the view that with the new tax scheme, property developers that plan to venture into the Sydney property market may have to rethink their strategy.

“Sydney property prices have been on the high side and the introduction of new taxes is aimed at curbing foreigners from buying properties there for investment,” the analyst said.

Eco World International Bhd, the overseas real estate unit of Eco World Development Group Bhd, has a project in Parramatta in Western Sydney.

TA Global, on the other hand, is also embarking on the second phase of its Little Bay Cove located at the southern tip of Sydney’s eastern suburb. The project is poised to be one of Sydney’s landmark lifestyle residential developments, comprising 582 apartments, town houses and land allotments, which will be delivered progressively in stages over the next seven years.

Do not ask your father-in-law about the value of your home. Go to The Edge Reference Price to find out.

This article first appeared in The Edge Financial Daily, on June 15, 2016. Subscribe to The Edge Financial Daily here.