Australia's biggest state hikes taxes for foreign property buyers

People walk in front of the General Post Office building at Martin Place, Sydney, New South Wales, Australia, on June 1, 2017.
People walk in front of the General Post Office building at Martin Place, Sydney, New South Wales, Australia, on June 1, 2017.PHOTO: EPA

SYDNEY (REUTERS) - Australia's most populous state will double property taxes for foreign buyers, the New South Wales treasurer said on Thursday, a move aimed squarely at Chinese investors as well as appeasing voters worried about housing affordability.

The push comes amid a raft of regulatory action to cool a hot housing market, especially in the country's east, and as concerns grow that foreign buyers have priced many locals out of the market.

The new charges, effective from July, come just as the frothy sector is already showing cracks, with prices slipping in Sydney and Melbourne last month.

A surcharge collected from foreigners on home sales will rise from 4 per cent to 8 per cent, while a land tax for foreigners is also being raised, New South Wales Treasurer Dominic Perrottet told reporters. Victoria state made a similar move a year ago.

The national government at it's budget earlier this month imposed fines for foreign owners with properties vacant for at least six months of the year, as well curbs on the kinds of property available to foreign purchasers.

Meanwhile, home prices fell in May in Sydney and Melbourne, CoreLogic figures published Tuesday showed, after dramatic gains of more than 15 per cent there over the 12 months to April.

Chinese investors are likely to be hit hardest, as they are the largest foreign buyers in Australia's property sector, ploughing two-thirds of a total A$47.3 billion (S$48.8 billion) sum into the property market in the 2016 financial year, government figures show. "I think it will heavily discourage their investment," said Ted He, managing director at CLG Corporate, a firm that advises Chinese property investors.

New South Wales Premier Gladys Berejiklian said the measure was part of a broader push to put downward pressure on property prices and make it easier for first-time buyers to make purchases.

The Reserve Bank of Australia in April warned of rising housing debt stoking bubble risks in the property sector. Policy makers, concerned a blistering run in home prices could create the expectation of a further jump in home values, have blamed speculators, led by foreigners, of pushing prices to unsustainable levels.