Australian state doubles taxes for foreign investors in property market

Premier of New South Wales (NSW) Gladys Berejiklian announced on Thursday she plans on doubling the taxes that will apply to overseas investors into the property market.

The move will see the foreign investor surcharge soar from 4 to 8 percent in terms of stamp duty, and see overseas buyers paying 2 percent in land tax, which was 0.75 percent previously.

The move intended was to ensure buying a home was not out of reach for locals, according to Berejiklian, who said in a statement obtained by Xinhua that she believes the housing affordability crisis is a "complex challenge."

"There is no single or overnight solution. I am confident these measures will make a difference and allow us to meet the housing challenge," Berejiklian said.

The plan to slug foreign investors was welcomed by politicians from both sides of the aisle, with NSW Opposition Treasurer Ryan Park suggesting that the ruling government stole the idea from the opposition.

"I have no problems with that (foreign investor tax), we made it first," Park said.

Cheryl Thomas, deputy executive director of the Property Council of NSW told Xinhua on Thursday that the application of this new tax must be "closely monitored."

"We must be careful that foreign investment does not become the 'boogie man' in our housing policy approaches, let's not jump at shadows," Thomas said.

"Foreign investment promotes growth, jobs and contributes to this state's income," she added.

Initially, foreign developers were also to be subjected to the tax increases, but Thomas was pleased that the government decided to alter their plans, and allow for those who provide housing supply to be exempt.

In a statement earlier this week, Ken Morrison, chief executive of the Property Council of NSW, warned of the dangers of casting out foreign investment from the Australian property market.

"We cannot let the myths about foreign investment continue to go unanswered. Foreign investment in commercial and residential real estate is a vital part of the Australian economy," he said.

The new tax hike comes as data released Thursday by CoreLogic showed that housing prices in the capital cities fell by 1.1 percent in May, while the annual rate of growth slowed to 8.3 percent.

Kristina Clifton, economist at the Commonwealth Bank of Australia said that there are tentative signs of a "cooling" in the housing market, driven by a slowing in lending growth to investors.