New withholding laws and property taxes to attract foreign investors to South East Queensland

Media Release - 23rd June, 2016

New withholding rules[i] on the sale of property by foreign residents, along with additional real estate taxes in NSW and Victoria, are set to attract more overseas money to South East Queensland, according to real estate group Raine & Horne.

“These new withholding rules come into play at a time when the NSW and Victorian governments are hiking up the stamp duty impost for foreign buyers as well as imposing increased land tax charges,” said Angus Raine, Executive Chairman, Raine & Horne.

The new withholding rules apply to property contracts of $2 million or more that are entered into on, or after 1 July 2016. Where the purchase value is $2 million or more from a foreign resident seller, a 10% withholding will be incurred at settlement. The withheld amount is credited against any capital gains or income tax payable by the seller on the sale.

At the same time, the NSW Government have imposed a 4% stamp duty surcharge on the purchase of residential property by foreign purchasers that commenced from Budget day, June 21, and a 0.75% land tax surcharge on residential real estate owned by foreign persons commencing in the 2017 land tax year[ii]. From July, Victoria will have a 7% foreign investor surcharge on residential stamp duty and 1.5% surcharge on some land tax[iii].

Clarke Brackenridge, Principal of Raine & Horne Surfers Paradise said that the new withholding rules will encourage foreign buyers to consider property markets such as the Gold Coast longer-term where it’s possible to secure quality real estate, which is priced well below the withholding threshold.

“It is early days for this new ruling, and foreign buyers are just starting to absorb the longer-term ramifications of this additional red tape,” said Mr Brackenridge.

“Notwithstanding the new withholding requirements, we are already seeing more foreign money starting to find its way to the Gold Coast, with new stock very popular with overseas buyers.

“At the same time, with a median apartment price in Surfers of $345,000 and yields above 5%, this is much better value than you’ll get Sydney or Melbourne – so it makes sense that with or without the new withholding laws, overseas buyers are starting to take the Gold Coast market seriously.”

 Even freestanding houses close to Surfers Paradise represent excellent value, according to Mr Brackenridge.

“We recently signed a tenant into a three bedroom, one bathroom house in Lambros Drive Benowra for $500 a week. Properties like this are selling for $500,000,” said Mr Brackenridge.

Brisbane’s affordability compared to Sydney and Melbourne is also set to attract more out-of-town investors to the Queensland capital.

“Southern state investors are more dominant than foreign buyers in Chermside, which is less than 10 kilometre north of Brisbane,” said Kim McHardy, Principal, Raine & Horne Chermside.

“However the introduction of the withholding regulations for foreign vendors will help us attract more overseas buyers longer-term, particularly when you can secure new apartments for about $450,000, which are producing yields of 4-5%,” said Mr McHardy.

Raine & Horne Chermside, for example, has recently listed a stylish brand new two bedroom, two bathroom, apartment at 4/9 Greenbank St, Chermside for $439,000[iv].

“Other features that will tick the boxes for foreign buyers include a growing pool of new apartment stock in Chermside, excellent proximity to the CBD and Brisbane Airport, exceptional public transport, along with a magnificent upgrade of the local Westfield shopping centre that will make it the biggest in Australia,” said Mr McHardy.

In Brisbane’s eastern bayside suburbs, foreign buyers are short on the ground, according to Margaret Vote, Principal of Raine & Horne Wynnum/Manly, although any additional red tape, which forces buyers to look outside Sydney and Melbourne, could change this situation.

“Our region has plenty going for it, with its excellent affordability, compared to Sydney and Melbourne, high on the list,” said Mrs Vote.

In Wynnum, the median house price is $610,000 and $455,000 for the suburb’s smaller pool of apartment stock[v].

“Enthusiastic foreign investors will note that yields for houses in Wynnum range from 4-5% and it’s 5% gross for apartments, which measure up well against the southern capitals,” said Mrs Vote.

“We have express trains to the city and Wynnum is just a 15 minute drive to airport, it’s a wonderful location to buy real estate.”

(i)  https://www.ato.gov.au/Media-centre/Articles/Property-withholding-rules-explained/
(ii) http://www.gladys.com.au/content/nsw-budget-foreign-investor-surcharge-stamp-duty-and-land-tax
(iii) https://www.premier.vic.gov.au/securing-a-fair-deal-for-victorians/
(iv) https://www.raineandhorne.com.au/chermside/properties/chermside-418681dd-a349-4684-a3ca-dde8109be104
(v)  https://www.raineandhorne.com.au/wynnum