Stamp duty and cash transaction reforms to impact Chinese interest in Sydney property

Thinking of selling your home to a buyer from China? You better hurry because unless you do so before Saturday you might have missed your chance.

Property experts say policy changes by the Chinese government and NSW state government, that are set to take effect from July 1, will potentially turn off foreign buyers.

From Saturday, stamp duty surcharges for foreign buyers will double from 4 per cent to 8 per cent as part of the state government’s measures to address housing affordability.

Buyers from China will also face extra scrutiny of currency transfers abroad, with banks and other financial institutions in China now required to report cash transactions of more than 50,000 yuan ($9630), compared with the current amount of 200,000 yuan.

China’s banks will also have to report any overseas transfers by individuals of $US10,000 ($13,060) or more.

It’s a double whammy that wasn’t lost on prestige agent Darren Curtis, of Christie’s International, on Tuesday night when he sold a Wahroonga residence on 2850 square metres for more than $7 million.

“The first half of this year has produced many buyers who are eager to secure a high-end property before June 30. There has been some indication that regulations from China are set to tighten from that date and that has really spurred the buyers I’ve been dealing with into action,” said Mr Curtis.

“We’ve helped three families secure properties all at $7 million or more this quarter. While our enquiry levels remain strong, it will be interesting to see how these changes effect the second half of this year.”

Thanks to tight stock levels in the prestige and trophy home markets, however, the stamp duty changes are not expected to have a major impact on prices, say prestige agents.

Michael Pallier, of Sotheby’s International, said while high-end buyers would rather avoid the stamp duty surcharge, those who haven’t found what they want by this weekend have just factored the extra costs into their budget.

Monika Tu, of Black Diamondz Concierge, said she had a client who was hoping to transact on an eastern suburbs property before the weekend in order to avoid the extra stamp duty.

“More than the extra cost, buyers are also aware the change in policy has come just a year after the state government already introduced the 4 per cent surcharge duty for foreigners,” said Ms Tu.

“The reason Chinese buyers come to Australia is because the laws are fixed and not subject to change all the time, but this goes against that.”

The state government introduced the higher stamp duty surcharge for foreign buyers as part of a broader package to address housing affordability, including abolishing stamp duty for first home buyers up to $650,000 and offering stamp duty relief for homes of up to $800,000.

From Saturday there is also a $10,000 grant for builders of new homes of up to $750,000 and purchasers of new homes up to $600,000.

Real Estate Association of NSW president John Cunningham says developers are less sanguine about the potential impact of the increase in the stamp duty surcharge than prestige agents, particularly given the 74,000 new houses approved to take shape in the coming year.

“It’s a big punt on the government’s part, especially given it comes when the market has already peaked,” Mr Cunningham said.

“It’s a matter of being careful what you wish for. If the curbs on foreign investment work too well it could impact supply and long term that could force overall prices higher still.”

The state government has also introduced an increase in the surcharge on land tax from 0.75 per cent to 2 per cent for foreign buyers.

“The doubling of the foreign investment surcharge on stamp duty and the increase in land tax must be watched carefully,” said Property Council NSW executive director Jane Fitzgerald. “We must monitor the effect a significant policy change such as this has on the market.

“Foreign investment in real estate gets new projects off the ground, increases housing and office stock and increases tax collections to all levels of government, we must not undermine this investment.”

In the year to July 2016 the Foreign Investment Review Board approved about 13,000 purchases by foreign buyers in NSW, making up about a third of the 40,000 approved purchases by foreigners across the country.

SMH / Jun 28, 2017