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Australian foreign buyer taxes won't put off Chinese – here's why

Chinese buyer enquiries for Australia was 37% higher in July than in June 2016.¹

Despite new foreign buyer taxes being implemented in three Australian major states – Victoria, New South Wales, and Queensland – Chinese buyers still love Australian property.

Australia is the #2 most popular investment destination for Chinese buyers on Juwai.com.¹

In fact, it would seem that Chinese property investors remain relatively unfazed on a whole, with many either choosing to readjust their investment budgets or to look elsewhere in Australia – such as Perth in Western Australia, which currently ranks as the #4 most enquired Australian city on Juwai.com.¹

Indeed, one can even say that Western Australia stands to benefit from these recent surcharges and taxes. After all, Western Australia offers the same coveted Australian lifestyle and prime educational opportunities – sans the higher taxes, steeper prices, and more cumbersome red tape.

About Australia’s new foreign buyer taxes

In a bid to improve housing affordability in Australia, three out of its six states have recently imposed new foreign buyer taxes on international buyers investing in Australian property.

Victoria – home to Melbourne, the #1 most enquired Australian city by Chinese buyers on Juwai.com in Q2 20161 – was the first state to announce a 3% stamp duty surcharge on foreign buyers.²

The surcharge, which increases the existing stamp duty surcharge to 7%, came into effect on 1 July 2016. Besides that, the Victorian government also increased the land tax surcharge for absentee owners from 0.5% to 1.5%.²

New South Wales (NSW) followed up as the next state to introduce a 4% stamp duty surcharge on foreign property investors, effective 21 June 2016 onwards.³ To top it off, the NSW government also announced a subsequent 0.75% land tax surcharge from 2017 onwards.²

Queensland soon followed after to become the third state in Australia by announcing that foreign real estate buyers would face an additional 3% stamp-duty surcharge effective from 1 October 2016.

Interestingly, these three states also happen to be homes to the top three most popular Australian cities for Chinese buyers on Juwai.com in Q2 2016 – Melbourne, Sydney, and Brisbane.

This leads us to the next big question: How would these new surcharges and taxes impact Chinese property investment in Australia?

3 reasons Chinese homebuyers won’t detour from Australia

With a 25% increase in Chinese buyer enquiries for H1 2016, compared to H2 2015, Juwai Data shows Chinese demand for Australian property is actually accelerating – even with tightening capital controls.

So, while some have predicted Chinese buyers will abandon Australia in their hunt for international property, the fact is that Chinese buyers are a savvy and pragmatic lot, and (as mentioned above) most Chinese buyers have actually taken these new foreign buyer taxes in strides. 

In short, these new foreign buyer taxes will not drive away Chinese real estate investors in the long run. We offer three reasons why:
 

#1 Record-low 1.5% rate cut means weaker AUD

The recent rate cut to 1.5% by the Reserve Bank of Australia (RBA)⁴ could potentially galvanise Chinese property hunters even further, as it could lead to an even weaker Australian dollar against the Chinese yuan.

This, in return, could offset the above-mentioned stamp duty surcharges on foreign property buyers in Victoria, NSW, and Queensland.

Considering most Chinese buyers have remained steadfast and pragmatic in dealing with the new foreign buyer taxes instead of taking flight from the Australian property market, this latest 1.5% rate cut by the RBA will be a strong motivating factor to convince them that Australia is still an ideal investment destination well worth the effort.
 

#2 New Guardian visa a boon for Chinese

With a record-breaking 46,400 Chinese students enrolled in universities, colleges, and high schools spread across Australia this year5, Chinese remains the biggest group of international students in Australia.⁵

Chinese accounts for 29.4% of all international students Down Under⁵, and their numbers are set to grow even more with the introduction of an all-new visa scheme, dubbed the ‘Guardian visa’ programme.

Announced by Australian Prime Minister Malcolm Turnbull just recently, the new Guardian visa (subclass 580) allows overseas students aged six and above, as well as their guardians, to apply for visas regardless of their country of origin.⁶

Already, the new Guardian visa scheme has shown signs of boosting Chinese property investor interest in Australia – Juwai Data charted a 20% increase in Chinese enquiry for Australian property since the announcement of the Guardian visas.¹

"We're already seeing inquiries about these new visas from Chinese families who want to have their children study here," said Dave Platter, PR Director of Juwai.com.

#3 10-year visa policy for Chinese visitors effective end 2016⁷

While the news of the 10-year visa deal between China and Australia was first announced last year, its new Australian Visa Application Center in Shanghai was only finally launched in June this year, and is slated to begin issuing 10-year visitor visas to Chinese travellers by the end of 2016.

The 10-year multiple-entry visa – which grants visa holders a 3-month stay in Australia per entry – is open for all Chinese citizens, and approvals will be granted based on the nature and time frame of the visit.⁷

This, on top of the new Guardian visa scheme, means Chinese will now have even easier access into Australia – a vital consideration for Chinese buyers when they decide on where to invest in.

It will also herald the arrival of even more Chinese tourists to Australia, and this often leads to property investments as well should they fall in love with Australia while holidaying there.

Australia remains a solid investment for Chinese

Beyond the three factors above, Australia just has many other facets that simply appeals to Chinese buyers, such as its reputation as a longstanding, popular emigration destination for Chinese HNWIs.

Australia is the #4 most popular emigration destination for China’s rich and wealthy.⁸

Furthermore, it’s not just because of its attractive lifestyle, pristine environment, and education options though, it’s also because Australia offers high transparency, stable political systems, and clear laws and regulations that highly captivate Chinese investors.

With Australia remaining such a compelling case for Chinese homebuyers, it’s safe to say that Chinese buyers won’t be leaving Australia in droves anytime soon.

Sources: 1. Juwai IQ Data, Q2 2016; 2. The Sydney Morning Herald: NSW Budget 2016: Foreign property buyers in NSW to be hit with stamp duty and land tax hikes; 3. Bloomberg: Sydney introduces new stamp duty on foreign homebuyers; 4. Financial Times: Australia cuts interest rates to record low 1.5%; 5. Australian Government Department of Education and Training: International Student Data 2016; 6. SBS: ‘Guardian visas’ boosting interest among Chinese property buyers; 7. Shanghai Daily: Australia announces 10-year-validity visitor visas to be open to all Chinese citizens; 8. Hurun Report “Immigration and the Chinese HNWI 2015”