“Instead of buying as non-residents, most are waiting until they have permanent residency in Australia. If you know you’re on the path to getting permanent residency, there is no reason to pay the extra costs that come with purchasing as a non-resident. That means the extra stamp duties and the uncertainty of the FIRB process.”
Anyone who isn’t highly motivated can be deterred by the fees.
— Real estate agent Peter Li
The fees overseas-based buyers pay for Australian new residential real estate – they are barred from acquiring established homes – are a combination of application fees charged by FIRB, a federal government body, and state-based charges.
The dynamics were not the same across all foreign buyer groups. Applications from India-based buyers rose in the quarter to 148 – their second-highest total – and the number picked up for buyers from Nepal from 88 to 92.
Sydney-based Peter Li, the general manager of project marketing agency Plus, said the fees levied on a non-permanent resident or citizen for a two-bedroom, two-bathroom unit in upper north shore Sydney’s Lindfield would add $151,200 to the $1.525 million unit 303 at 305 Pacific Highway that a domestic buyer would not have to pay.
“Anyone who isn’t highly motivated can be deterred by the fees,” Mr Li said. “I’m talking about the application fee and the stamp duty.”
The FIRB application fee alone for the Village Lane unit would be $28,200 and while the stamp duty paid by all buyers would be $69,781, the extra stamp duty surcharge for a foreign-based buyer would come in at $122,000. In addition, there would be extra legal costs worth about $1000, Mr Li said.
The Urban Development Institute of Australia said such higher charges for overseas buyers restricted the number of new residential developments, as they reduced the pool of buyers who would fund such projects.
“The reality is that the Australian market has always relied upon foreign investment to bolster our rental market as it enables another Australian renter to get into the apartment market and as it adds stock to the rental market,” the developer lobby group said.
Mr Li said China’s weakening economy – as well as the decision in December to axe the significant investor visa that drew wealthy immigrants – would cut applications from that country further.
“On the other hand, we see increasing demand from South-East Asia,” he said.
“Overall foreign buyer demand will remain similar, but the source countries will change.”
