Chinese buying homes elsewhere

AN AGGRESSIVE crackdown by the states and the Federal Government is sending Chinese buyers of Australian residential real estate offshore.

Last year the NSW Government doubled stamp duty for foreign investors from 4 per cent to 8 per cent and increased the annual land tax surcharge from 0.75 per cent to 2 per cent.

The Federal Budget removed capital gains tax exemptions for overseas buyers and introduced a 50 per cent ownership cap for new residential developments.

The budget also introduced a “ghost tax”, giving the Australian Taxation Office the power to fine foreign investors up to $5500 a year if they leave their properties empty, plus up to $52,500 for failing to lodge their forms.

Meanwhile, the Victorian Government’s own vacant residential land tax kicked in this month, with owners in 16 council areas facing potential fines equal to 1 per cent of the property’s value if they leave their properties empty.

Last year, Credit Suisse analysts estimated foreign buyers bought 25 per cent of all new supply in NSW, with Chinese buyers accounting for nearly 80 per cent of foreign demand.

But according to financial services company UBS, tax and regulation changes – combined with moves by the Chinese government to prevent money flowing offshore – are sending those buyers to greener pastures, with Bangkok tipped as the next hotspot.

“What we have found is that Chinese buying of property abroad tends to be very price and currency aware,” UBS head of global property research Kim Wright told The Australian.

“Their focus on specific markets will fade or pick up, depending on their view of currency. Over the last two years we have seen Asian buying of Australian property, specifically Sydney, Melbourne and Brisbane, that’s been very strong.

“It looks like that has started to fade over the past six months.

“I think it’s the combination of factors.

Prices have been very strong in Australia so there is now a discussion that the cycle has started to peak and there’s the tax changes that have come through along with the tax controls.”

It comes after latest CoreLogic data showed national dwelling values fell 0.3 per cent in December.

AMP Capital chief economist Dr Shane Oliver said: “Tighter lending standards, rising levels of unit supply, slower Chinese demand and reduced investor enthusiasm for property are all impacting and are likely to lead to further declines in Sydney and Melbourne property.”