Is spring the season for local buyers?

There’s been a lot of talk about foreign buyers pricing Sydneysiders out of the market in recent years. The media has been hotly debating the issue, with the real percentage of foreign buyers said to be far lower than public perceptionsindicate.

The Upper North Shore has wide appeal, and remains popular with locals, ex-pats, and overseas buyers.

Interestingly, it’s not just overseas parties who count as foreign buyers, but also temporary residents working in Australia.

But a suite of new regulations announced prior to winter by the NSW state government and the federal government, as well as some changes afoot in some of the traditionally stronger overseas markets, means this spring could be shaping up to be the local buyer’s season.

There are a number of factors at play this spring which could make the Sydney market more or less attractive to foreign buyers:

Tax increase on foreign buyers

Stamp duty and land tax

The NSW government recently announced a doubling of the stamp duty tax rate applicable to foreign buyers earlier this year, taking it from four per cent to six per cent. In addition, land tax for foreign owners will shift from 0.75 per cent to 2 per cent. In a city where the median house price hovers around the $1 million mark, that’s a significant boost and likely to make foreign investors think twice.

Capital gains tax

Foreign owners and temporary residents who purchased property after the 2017 federal budget are no longer eligible to claim the primary residence capital gains tax exemption upon sale of their property.

Vacancy charge

The federal government has introduced a charge for foreign owners who leave their residence vacant or unavailable for rent for more than six months in a year.

Limiting foreign ownership in new developments

This is a double-edged sword – the policy, again announced in this year’s federal budget, applies to the ownership of newbuild apartments in complexes of over 50 apartments. No more than 50 per cent of these buildings can be foreign owned. While this will reduce the number of newbuild apartments available to foreign buyers, it could increase the attractiveness of, and therefore competition for, existing dwellings.

Other policy changes

Migration uncertainty

Recently proposed changes to migration by the federal government, including extending the amount of time required to wait for citizenship and revising the skilled work visa scheme to contain stricter English language proficiency requirements and reducing the number of eligible occupations and the amount of time certain visas are issued for.

Changes abroad

More scrutiny of Chinese capital

Recent directives from China’s government on the way citizens – the biggest foreign investors across all Australian real estate – and companies can spend their capital overseas, specifically targeting real estate, look set to dampen enthusiasm for investing money in Australian property, be it residential or commercial.

The US, Asia and Europe

It’s not all bright news for local buyers though, with overseas buyers from other countries continuing to invest capital in Australian property.

In the United States, a lack of surety over government policy, as well as increasing unaffordability on the West and East Coasts could promote further interest from what is already the second biggest overseas source of property investors buying Australian dwellings.

Despite the new tax changes, this stability, a lack of housing supply in Sydney’s established suburbs and continuing signs of value growth, will see Australia remain a popular destination with Singapore, Malaysia and South Korea, who along with China and the US round out the top 5 spenders on Australian property.

Although a smaller player in the Australian property scene, economic unrest over Brexit in the UK and beyond has the potential to increase the appeal of offshore residential investments, particularly for Australian ex-pats.

If you’re thinking of buying or selling in Sydney’s Upper North Shore talk to our team about how we can help.

Disclaimer

DiJones Real Estate, together with their directors, officers, employees and agents have used their best endeavours to ensure the information passed on in this document is accurate. However, you must make your own enquiries in relation to the information contained in this document and seek advice from your financial advisor, broker or accountant to ascertain its application to your circumstances.

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