Bloomberg Businessweek (North America)
Aussies Tax Foreigners Extra for Buying Homes Hot Jobs Taking Care Of Turbines
▶ Local banks tighten mortgage rules for outsiders ▶ “The public has reservations about foreign investment” Wind-turbine service technician is the job category projected to expand more than any other from 2014 to 2024, outpacing health care and technolo
Homebuyers from China have been getting a clear message from Australian banks: Look elsewhere. Citigroup’s local bank will no longer approve mortgage applications in Australia that rely on foreign income denominated in Chinese yuan and four other Asian currencies, spokesman Matthew Coleman said in an e-mailed statement on May 10. Citi had been receiving more applications after a decision by Commonwealth Bank of Australia, National Australia Bank, and Australia & New Zealand
Banking Group that restricted lending to nonlocals. The banks are being pressured to help local
Chinese investment doubled for the second straight year
homebuyers who feel crowded out by rising prices. Westpac Banking in April said it would stop lending to offshore customers who aren’t citizens or residents. Westpac wants to support Australians and permanent residents “on their journey to own a home or investment property,” the bank said in a statement.
Foreigners accounted for 20.9 percent of Australian home sales in the year through June 2015, up from 7.9 percent in the 12 months ended June 2013. The foreign money has fueled an already fast-climbing market: Home prices have risen 50 percent in the biggest cities since the end of 2008.
With elections in July, Prime Minister Malcolm Turnbull and the opposition Labor Party are pledging to make homes affordable. “The public has reservations about foreign investment, and politicians can see gains from tapping into that sentiment,” says James Laurenceson, deputy director and professor of economics at the Australia-china Relations Institute of the University of Technology Sydney.
Last year the federal government cracked down on unlawful purchases, such as buying an existing home. (Foreigners can buy only newly built homes.) As a result, the government forced foreigners to sell 27 properties worth more than A$76 million ($55 million). In December the government introduced fees for foreign investors: A$5,000 for a property worth as much as A$1 million and A$10,000 for every additional A$1 million. The state of Victoria will double a property tax for foreigners in July. Nationwide, the surcharge on legal documents prepared for a house sale will increase to 7 percent from 3 percent for foreigners; a land surcharge on absentee owners will go up to 1.5 percent, from 0.5 percent.
In New Zealand, homeowners are also blaming foreigners. The median housing price has jumped 34 percent since April 2012, according to the Real Estate Institute of New Zealand. Phil Twyford, a member of Parliament and spokesman on housing for the opposition Labour Party, says the market “is extremely overheated, and it’s causing a great deal of angst. Speculators are hoovering up low-income suburbs.” He says foreigners are partly to blame for soaring home prices in Auckland.
In Australia the restrictions are
having an effect. Antony Woodley, an auctioneer at Marshal White in Melbourne, says he still sees offshore buyers, “but regulatory changes have quietened down the phenomenon over the past few months.”
Australian property keeps its appeal for buyers from the crowded and polluted cities of China. Accountant Han Fantong, a permanent resident who recently paid A$930,000 for a three-bedroom home in Melbourne, got help from his parents in China. “Houses here are still a lot cheaper, larger, and better quality than those tiny apartments in Beijing,” he says. “I would never imagine living in an American-style house with a garden in Beijing.” �Bruce Einhorn and Narayanan Somasundaram
The bottom line In Australia, foreigners—who accounted for 20.9 percent of the value of home sales in 2015—face more taxes and restrictions.