The market for real estate in Sydney for 2023 will be full of big events and good things.
If there are any obstacles for foreign investors to buy property in Australia, I am afraid that the stamp duty surcharge and land tax surcharge for overseas persons are more important factors. This is because these two taxes mean that foreign investors need to spend tens of thousands of Australian dollars in Sydney stamp duty, sometimes hundreds of thousands of Australian dollars (if buying a luxury home), to compete with locals for the same house. The cost is significantly higher. In addition to this, the land tax surcharge also increases the cost of foreigners holding Australian property.
But two of the biggest tax hurdles may soon disappear in Sydney. At present, people from all walks of life are rejoicing, rubbing their hands, waiting for the explosion of the Sydney property market.
1. Sydney’s Stamp Duty Reform 2023
Let's start with a Sydney stamp duty reform that is beneficial to Australians. New South Wales, where Sydney is located, is introducing the largest stamp duty reform policy in more than 30 years; such a big move will definitely affect the interests of many people. The most important thing is that once the Sydney reform is officially implemented and works well, the rest of Australia will follow suit to a large extent (for example, it is said that Melbourne is now ready to move!).
So at this time, some experts have come forward to comment on the changes that this policy will bring. AMP Capital chief economist Shane Oliver said that once the new policy is implemented, the price of properties worth less than $1.5 million Australian dollars in Sydney will stand firm or even rise in the short-term. Then it will soon lead to the recovery of the entire real estate market.
Simply put, this policy gives buyers a choice question - either A or B - and the name of this new policy is First Home Buyer Choice.
Specifically, first-time home buyers can choose to pay Sydney stamp duty in one lump sum. Alternatively, they can choose to pay $400 per annum, plus a property tax of 0.3% of the land value - but only if the total value of the house you buy is less than $1.5 million.
This is a bit like the idea of installments; so people who want to buy a house for the first time don't have to work hard to save for the stamp duty of tens of thousands of Australian dollars, therefore the burden is much smaller.
So how big is the difference after making different choices?
Let's say you buy a property in Sydney and sell a property for $1 million. According to the existing stamp duty rate schedule, the charges are tiered so the more expensive the property, the higher the stamp duty. For a $1 million house, the current stamp duty rate is $40,502.
So if you choose not to pay stamp duty but instead to pay property tax every year, this property tax is mainly for the value of the land. Then, according to the calculation table of land tax under the new policy, the $1million Australian dollar property of which the land valueis $600,000Australian dollars, you will pay an annual paymentof $400 Australian dollars + 600,000* 0.3% = $2,200Australian dollars. After 18 years, the total expenditure is $39,600, which is almost as much as the stamp duty but still sounds very cost-effective. This figure, however, does not take into account the fact that the assessed price of the land will rise over time.
This reform does not only apply to owner-occupied housing, it also covers investment housing. In general, after the implementation of the policy, first-time home buyers who have PR status and want to buy a property in Sydney, and are looking at an apartment are likely to be the ones who smile the most. This is because the land area contained in apartments is very small, especially high-rise apartments. So if you are buying an apartment, you can basically pay a few hundred dollars in property tax every year, even if you pay it for 60 years, it will not be higher than the stamp duty.
Sydney's stamp duty reform 2023 will generally boosted the city’s overall house prices, especially homes worth less than $1.5 million.
2. Sydney abolished the stamp duty surcharge and land tax surcharge for overseas persons
The NSW government issued a notice in 2023 that citizens of New Zealand, Finland, Germany and South Africa who buy property in Australia no longer need to pay the Surcharge Purchaser Duty and the Surcharge Land Tax. If any of you purchased a residential property in NSW after 1 July 2021 and paid these 2 taxes, you can apply for a refund with the NSW government immediately and will not have to pay it in the future.
Investors buying property in Australia, first of all, must understand that there is a difference in taxes for overseas buyers and local buyers buying residential properties in Australia. Simply put, Australia collects more taxes from overseas buyers. For example, Sydney locals buy a house and are expected to pay a one-time payment of a certain percentage of the property value known as stamp duty (according to the value of the property for different step charges). The general price that a local needs to pay is tens of thousands to hundreds of thousands in Australian dollars.
Overseas buyers (non-Australian citizens or permanent residents) who buy property in Sydney also have to pay an additional Surcharge Purchaser Duty. Currently, the stamp duty surcharge in Sydney is 8% of the value of the property.
In addition, from June 21, 2016, the Australian government began to impose a Land Tax Surcharge on overseas buyers. That is, overseas buyers will have to pay an additional 2% per year after buying a property in Sydney (Land Tax). From midnight on December 31, 2022, the additional land tax payable is increased to 4%.
But now, the state where Sydney is located has exempted some national investors from both tax regimes and is expected to expand to more states in the future.
It has to be said that the various policies currently introduced by Sydney, including stamp duty reform, will have a role in the next wave of house price increases. Investors who intend to buy property in Sydney have the conditions to enter the market decisively.
3. Where to buy property in Sydney?
Burwood: Burwood has long been one of the most sought after areas for Chinese property buyers, known for its high-quality schools, short distances to the CBD and other amenities, and a thriving nightlife and cultural scene. Burwood is close to the transportation hub artery, close to Strathfield and Ashfield, and has two shopping malls, as well as Chinese shops and restaurants, which are convenient for both consumer shopping and access. It’s one of the most promising areas in Sydney's inner west.
Rouse Hill: Known as Sydney's invisible affluent area, this area is close to the Northwest Business Park, Australia's largest Fortune 500 business park, and has the largest commercial centre and transportation hub in the Northwest. The business park has brought about a rapid increase in the number of high-quality, high-income employment population, with more than 50% of residents earning more than $88,000 Australian dollars, far higher than Sydney's per capita income level, and even comparable to the Manly affluent area. This area is ranked among the top quality of life in Macau and is very suitable for living. Housing prices have also risen as the government has invested heavily in infrastructure.
North Sydney: Sydney's traditionally affluent area has become the most central location outside the CBD in recent years. Home to the headquarters of many Fortune 500 companies, attracting countless talent and visionaries, it is undoubtedly Sydney's noble financial centre, full of opportunities to rival Wall Street in the United States. The demand for real estate has been high, and the return on investment is relatively high.
Summary:
Australia is known as the most popular immigration country; the real estate market has also been open to overseas buyers for a long time (as long as it is within the range of real estate allowed by the government - for example, overseas buyers can only buy new houses, not buy second-hand houses). Overseas buyers generally encounter relatively few rigid conditions, even if they are not Australian PR or citizens; as long as you are over 18 years old and have sufficient purchasing power, you can own a property of your own in Australia. However, after 2016, in order to curb the rapid rise in house prices, the Australian government introduced a series of tax systems for foreigners, which largely suppressed the demand for overseas buyers.
Now, we are seeing that cities such as Sydney are opening their arms again to overseas investors with Sydney’s Stamp Duty Reform in 2023, which is a very positive sign.
Alison’s Story
Born in Hong Kong an moved to Australia, I have been associated with real estate all my life. As the plane slowly landed on the runway of Melbourne Airport, my life and career also changed to another runway. I changed from a Hong Kong real estate agent to an Australian real estate agent, and successfully obtained the Australian lawyer qualification.
When I was working in a law firm, I was surrounded by highly educated professionals. Even though their wages are very well, and they are absolutely the elites in society, but their lives are full of hard labor, and it’s hard for them to get rich through buying properties.
So I spend all my time and effort on learning financial and real estate investment knowledge, hoping to achieve financial freedom as soon as possible, and let my parents who have worked hard for many years live a good life.
Now I will share with you the knowledge and experience of investing in Australian real estate, and embark on the road to financial freedom together.
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