The HIA has called for housing policy reforms, including changes to stamp duty, after claiming that taxes on foreign capital were deepening the housing deficit.
The Housing Industry Association (HIA) has said that taxing foreign institutional capital is the 'worst own goal in the myriads of housing policy mistakes', while calling for major reforms to housing policy.
The industry body also said in its latest Stamp Duty Watch report, released Monday (16 June), that excessive taxes were creating a foreign capital exodus, which was deepening the housing deficit. The Australian government will not meet its target to build 1.2 million new dwellings by 2029, while taxing the capital needed to build new homes, the HIA said. The report also found that the average stamp duty bill on a median-priced home had reached $31,210, a record high and a 55 per cent increase since 2019. In Queensland, the burden has nearly tripled.
These upfront costs are forcing Australians to take on greater levels of debt, reduce the quality of housing they can afford, or delay entering the market altogether, the HIA said.
Foreign investors in residential real estate are subject to additional taxes aimed at managing housing affordability. Taxes include stamp duty surcharges, land tax surcharges, and capital gains tax withholding. Stamp duty surcharges for foreign buyers range from 7–9 per cent, depending on the state, while land tax surcharges range from 5 per cent in NSW to nothing in South Australia. The HIA further said that state governments had introduced punitive stamp duty and land tax surcharges on foreign capital over the last decade.
Foreign institutional investors in those states face up to $160,000 in stamp duty, land tax, and foreign investment fees on a typical new dwelling, up to four-and-a-half times the amount paid by local investors.
The HIA has called for a 'reset' of national housing policy, including the abolishment of stamp duty surcharges and land tax surcharges on foreign investors.
It also said the government needed to align migration, housing supply, and planning policy.
The HIA recommended that tax-neutral investment rules be adopted to encourage institutional participation.
A review into the effectiveness of investor surcharges annually should also be undertaken, along with the provision of long-term certainty to restore investor confidence, the HIA said.
In its report, the HIA stressed the need to "distinguish between foreign investors, who fund new housing, and temporary residents, such as international students, who consume it".
"Misunderstanding this distinction has led to contradictory policies that stimulate housing demand while simultaneously penalising those who finance housing supply," the HIA said.
Commenting on the need for reform, HIA chief economist Tim Reardon said: "Australia cannot build 1.2 million new homes in five years while taxing the capital that is necessary to build those homes.
"Foreign institutional capital does not create housing demand. It creates supply," he continued.
"Taxing this capital reduces the supply of homes being built, even as migration continues to surge and create demand. This is the worst own goal in the myriads of housing policy mistakes.
"The combination of surging migration and stagnant home building, constrained by poor policy design, has left Australia in a housing deficit.
"Reversing the foreign capital exodus is not only a rational economic choice, but also essential to delivering the homes Australians need."