Why WA’s foreign buyer surcharge and stamp duty reform must be on the WA election agenda
With Western Australia’s state election now less than two months away, incentives for property investors are looming as a hot election issue.
This week The Real Estate Institute of Western Australia (REIWA) called for real estate to be a focus in the upcoming WA election, calling on all contesting parties to commit to short-term financial incentives such as stamp duty or land tax rebates for investors.
Already one of the biggest financial barriers to home ownership and mobility, our current stamp duty system is over a century old and is in desperate need of a major overhaul.
While the NSW government has committed to major stamp duty reform which will be underway as soon as mid-year, the pressure is now on the WA government to step up to ensure the momentum in the sector will continue at a time we need it most.
REIWA President Damian Collins is calling on every political party to commit to changing the way stamp duty is paid and for a state tax review to take place.
The Institute estimates that approximately one third of units sold in 2020 were bought off-the-plan due in no small part to the current 75 per cent stamp duty rebate for off-the-plan and under construction apartments.
Without ongoing incentives such as this, the health and buoyancy of the WA apartment market will decline and the much awaited recovery of the sector will stall. Which is why it is vital that this off-the-plan stamp duty rebate be made a permanent feature of WA’s property tax system, rather than letting the legislation expire in October 2021, as it is currently on track to do.
In addition to pushing for an extension of the off-the-plan stamp duty rebate scheme, the Urban Development Institute of Australia (UDIA) is pushing reform of WA's foreign buyer surcharge to attract international investors back into the state, - a key factor in seeing the sector recovery continue.
In February 2020 the Liberal Party confirmed it would remove the McGowan Government’s surcharge on foreign buyers of residential property in WA if successful this election.
Unsurprisingly the 7 per cent Foreign Buyers Surcharge, which came into effect on 1 January 2019 and added on more than $40,000 to the cost of buying an average Perth apartment coincided with a significant decline in apartment sales.
While foreign buyers account for just 10 to 15 per cent of apartment sales in WA, because they are usually the first to buy-in, their purchases are crucial to ensuring developers meet the sales hurdles required to get finance approved so projects can go ahead.
To quote UDIA WA chief executive Tanya Steinbeck, “In the short term we are seeking a commitment [from the WA government] to implement a moratorium on the Foreign Buyers Surcharge, which has essentially put a halt on investors buying into the WA apartment market and exacerbating the rental supply crisis.”
Removing these two biggest barriers to home ownership and mobility for thousands of West Australians are the bold reforms needed to make WA attractive to both local and international investors and property buyers now and for years to come.