NSW apartment construction has nose-dived in the years following the state’s tax hikes for foreign investors, according to new data.
A recent building activity report from the Australian Bureau of Statistics (ABS) revealed that the number of units commencing construction has plummeted a whopping 50 per cent since 2017, falling back to levels not seen since 2012.
The last two years of multi-units activity in NSW is less than half that of the 47,757 multi-units the state commenced in 2016, with only 23,653 being approved in 2023 and 21,652 in 2022.
But while many point towards the pandemic and rising construction costs as the cause of the slow down, Housing Industry Association (HIA) Chief Economist Tim Reardon blames the state’s crackdown on foreign investors.
In 2017, NSW introduced additional stamp duty and land tax surcharges on foreign investors, forcing owners to fork out an extra 4-8 per cent on top of the already hefty apartment price tag.
When combined with increased taxes, fees and charges imposed by the Government in recent years, Mr Reardon says Australia’s hostile tax policies have caused an “exodus of foreign investors” and a dramatic drop in higher-density home building.
“The more governments tax homes, the fewer homes will be built and the faster rents will increase,” he said.
“Making homes more expensive is not an effective policy response to achieve a slowing in migration to NSW.”
With experts expecting the Government to fall well short of its 1.2 million home-building over the next five years, Mr Reardon said ministers should instead be walking back these policies to incentivise foreigners to invest in the Aussie housing market.
“Foreign investors are a crucial component to building new housing in Australia, especially the higher density living that is particularly important in periods of rapid migration,” he said.
“Foreign investors don’t live in these homes, and they cannot take them overseas and they are penalised if these homes are left vacant.
“Australian-based institutional investors, who received a tax concession in the 2023 Federal Budget to invest in residential housing, are not filling the gap left by the withdrawal of overseas investors.
“At a time of record population growth and acute shortages of housing, NSW needs more of all types of homes with the support of investment from first home buyers, owner occupiers, government housing, domestic and foreign investors.”
NSW looks to increase taxes
But the NSW Government seems to be taking the opposite approach. In a baffling attempt to stifle the country’s all-time-high migration numbers, Treasurer Daniel Mookhey has suggested that the state may increase the foreign tax surcharge and close a loophole that allows temporary residents to buy dwellings and then leave them empty.
Premier Chris Minns confirmed that the policies are on the table as the state irons out the details of the next state budget, due out in June 2024.
The NSW executive director of the Property Council, Katie Stevenson, said that the Treasurer’s proposal would “create new obstacles for the property sector” and make developing in NSW “even more difficult and less attractive”.
“You cannot expect us to build more homes than we’ve ever built before, while simultaneously creating an environment that is increasingly hostile to investment,” she said.
“Whether capital comes from at home or overseas, we need to be removing barriers to the creation of homes in our state. The property industry cannot afford to be government’s scapegoat.”
