A bad day for foreign buyers

Yesterday was a bad day for foreign buyers interested in Melbourne real estate.stamp duty

Foreign buyers will have to pay more stamp duty on residential real estate, and higher land tax, under Victorian government reforms that could raise an extra $500 million over four years.

Victorian Treasurer Tim Pallas on Friday said next week’s budget will increase the stamp duty surcharge for foreign buyers from three to seven per cent, and the land tax surcharge for absentee owners from 0.5 to 1.5 per cent.

No other state has these surcharges and it sends a terrible message internationally.

In one fell swoop, the Government has surrendered Melbourne’s competitive investment edge to Sydney making it now a more expensive city to investment in than Sydney.

For example:

An Australian citizen buying a $700,000 property in Victoria would pay stamp duty of $37,070., while a foreigner buying would pay $58,070today.

After 1 July this year a foreigner buying will pay $86,070. That’s 12.29% of the purchase price!

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

Victorian Treasurer Tim Pallas explained it this way:

“No Victorians will pay these surcharges. This is about ensuring foreign owners pay their fair share.”

“It’s only fair that foreign buyers of residential real estate, who enjoy the capital growth as a result of Victoria’s liveability and the amenity of our cities, contribute to the maintenance of government services and infrastructure.”

“Since we introduced these surcharges last year, there has continued to be a welcome and steady stream of foreign interest in our residential real estate. The surcharges ensure that buyers will continue to benefit from the best services and infrastructure.”

Also published on Medium.

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Michael is a director of Metropole Property Strategists who create wealth for their clients through independent, unbiased property advice and advocacy. He's been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au

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