Queensland Budget 2016: Foreign investment charge ‘bad PR’ for ‘fragile’ market

Treasurer Curtis Pitt “giveth and taketh”, with real estate figures slamming his decision to slug international buyers. Photo: Glenn HuntQueensland Treasurer Curtis Pitt’s budget money spinner, which essentially doubles the stamp duty for foreign investors, has been slammed as “bad PR” by the state’s property market pundits, who claim it will “put a dent in demand” and damage an already “fragile” market.
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The opposition has also seized on the 3 per cent transfer duty surcharge foreign investors will be slugged with from later in 2016 as a “broken promise” after Mr Pitt dismissed the idea last year following Victoria’s decision to raise its own charge from 3 per cent to  7 per cent.

On Thursday, Mr Pitt had changed his tune, saying he did not believe the 3 per cent charge would close Queensland off from business or greatly affect the decisions of foreign investors, particularly given the state’s comparable housing affordability.

But first he had to correct his own verbal slip, having originally told a Media Club luncheon he didn’t believe “$336 will be enough to frighten buyers away from Queensland”.

That figure seemingly came from calculating 3 per cent of the additional duty charge, which is about $11,000 – the actual additional cost foreign investors will be coughing up for a home worth just over $360,000.

His office later corrected the figure but shadow treasurer Scott Emerson said Mr Pitt had grossly underestimated the impact of the surcharge.

“His calculations weren’t even close – the treasurer was out by more than $10,600,” Mr Emerson said on Friday.

“The treasurer doesn’t even understand the impact of the tax hikes he is advocating.”

The charge won’t affect Queensland buyers, who will instead be gifted an extra $5000 for first home buyers, with the government expanding the grant to $20,000 for newly constructed properties under $750,000 for one year. But Shadow Treasurer Scott Emerson said it wasn’t good enough.

“Labor has never seen someone else’s money they didn’t want to spend and it’s Queenslanders who will again be left to pick up the tab for Labor’s budget mismanagement,” he said in a statement targeting the foreign investor surcharge.

“We only need look to the past to know what is coming under the Palaszczuk-Pitt government – higher rego fee increases, more property taxes for homeowners, double-digit increases in public transport fares and higher business taxes, just to name a few.”

Mr Pitt said the scheme aimed to raise about $15 million in the first year.

For an investment property with a dutiable value of $365,400, the duty will be calculated as $1050 for the first $75,000, plus an additional $10,164 for the balance above $75,000, as is standard, totalling $11,214 in transfer duty.

A foreign buyer would then have to pay an additional 3 per cent on top of the dutiable value, which in this example, would double the duty costs flowing to the government, with an additional $10,962 heading to government coffers.

While Victoria already charges foreign investors more than double what Queensland is planning and New South Wales has hinted at a potential double-digit charge, the sunshine state’s property lobbyists have reacted in anger to Mr Pitt’s announcement.

“The Treasurer giveth and he taketh,” Paul Bidwell of the Master Builders Queensland said.

“So we think the increase in the homeowner grant is a good thing, particularly in regional Queensland in the housing construction sector, they are languishing, so it will pull forward some demand.  An extra $5000 on top of $15,000 is good.

“But the downside of it is the increase in the stamp duty which will have a major impact I think, in south-east Queensland particularly in the unit market and already we are seeing, although the approvals are still going up, there is a lot of nervousness about where that is headed.

“So we need those foreign investors to invest.  Is it going to stop them?  Well, it is not going to help them.

“It is going to put a dent in demand in south-east Queensland.”

Warwick Temby of the Housing Industry Association was also against the move.

“It is not a lot of money, but the impact on overseas confidence about investing in Queensland is potentially damaging. It is bad PR,” he said.

REIQ chief executive Antonia Mercorella said the decision was “the Queensland government … treating the property sector like an ATM once again”.

“Curtis Pitt made a firm commitment to Queenslanders and the property industry in 2015 that he would not raise stamp duty or increase costs or fees for foreign buyers,” she said in a statement.

“He said, ‘Queensland is open for business’ – but today he’s slammed the door shut.

“The state government has failed to consult with industry groups on this matter and if they had, we would have told them how fragile the market is at the moment.

“This could not come at a worse time – regional Queensland is struggling and we have rising vacancy rates along with falling job rates.

“Regional Queensland – where two-thirds of us live – needs all the investment help it can find and by adding another tax on the top of what they already rake in, the state government is further threatening the viability of the property market.”

The Property Council also roundly criticised the move.

“Foreign investors enable new residential projects to get off the ground, creating a huge economic benefit for the state and producing new stock that puts downward pressure on rents and keeps housing affordable for Queensland families,” Queensland executive director Chris Mountford said.

“The Treasurer’s commitment to increase the first home buyer incentives is welcome, but they will not be enough to offset the significant impact of this policy reversal.

“There are international investors currently weighing up the merits of residential projects in Queensland. If they choose to go elsewhere, so will the government’s revenue.”

Announcing the move on Thursday, at the same time as the First Home Owners Scheme sweetener, Mr Pitt has ensured more of next Tuesday’s bad budget news won’t overshadow its future economic plan.

Mr Pitt has already released the budget shortfall of $4.7 billion, mostly due to the depressed international commodity prices and less than expected taxation revenue, since he first handed down a budget in 2015, as well as admitting that Queensland should prepare for a conversation about raising taxes beyond 2018.

But the second budget also marks the government’s shift into pseudo-election mode, with a big focus on regional Queensland, where the minority Palaszczuk government is looking to shore up seats.

The budget will be handed down next Tuesday.

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