Victoria, Australia raises stamp duty for foreign home buyers

Victorian treasurer Tim Pallas announced that in next week’s budget his government will increase stamp duty for home purchase by foreign buyers from 3% to 7% and he expects the benefit would amount to $500 million over next four years. Increased duty will come into force from July 1st. Taxes on land purchase will also go up by 1% from current 0.5%.

He said, it makes sense, since foreign buyers don’t contribute to the government any major taxes under GST, but enjoys capital gains as well as amenities of cities such as Melbourne. Last year, Melbourne saw house price rise of almost 10%, only second to Sydney in entire Australia.

However, this is the first time, any state has moved unilaterally to raise such duties and according to independent analyst, it will reduce Melbourne’s edge over Sydney as investment destination.

Nevertheless, it is a good move to excessive property purchase by foreigners, which if not checked could eventually lead to a bubble, which is exactly what Reserve Bank of Australia and regulators have been trying to fight since last year.

Major foreign buyers in Australian market has been buyers from China.