Australia ‘will pay foreigners up to $50,000’ to buy a new home as Perth market set to boom

Source: News.com.au

Chinese buyers are being lured back to the Australian property market by generous government rebates of up to $50,000 on a new home, with calls to extend the incentive schemes past their expiry dates next year.

Lily Chong, the Perth-based Australian head of Chinese property portal Juwai IQI, said overseas buyers had started looking past the COVID-19 pandemic and were planning for when travel restrictions eased.

“Australia will pay foreigners up to $50,000 to buy a new home,” Ms Chong said.

“Australia will pay Chinese up to $50,000 to buy a new home, Australia will pay Hong Kong-ers, Australia will pay Malaysians – it doesn’t matter where you come from. It’s all in the interests of supporting the economy.”

Western Australia currently has the most generous incentives available to non-citizens, with a 75 per cent rebate on the foreign buyer duty for off-the-plan purchases, capped at $50,000.

In Victoria, rebates of up to $27,500 are available under the land transfer duty waiver scheme.

“Because of the pandemic, most foreign buyers don’t know about these incentives,” Ms Chong said.

“When we explain it to them, their eyes pop open. Buyers are rushing for us to get their deals done before the deadline expires.”

WA’s rebate scheme has been extended until October 21 next year, while Victoria’s ends on July 1.

Australian citizens can, in addition, take advantage of the federal government’s $25,000 HomeBuilder rebate for new home purchases or renovations, which will decrease to $15,000 at the end of the year before expiring in March.

Ms Chong predicted the incentives would shift overseas buyers from other parts of the country to WA and to a lesser extent, to Melbourne.

“Buyers in Queensland are now looking at Perth because of the incentives,” she said.

“Buyers who aren’t tied down to a specific location will go wherever they can to get the best deal. Right now, that’s Perth.”

She said there was a lot of interest now for “Airbnb-ready apartments” being sold by Juwai.

“They are pre-approved for short-term leasing, start from $303,000 and can deliver yields of 8 per cent,” she said.

Juwai says its Perth office now has more than a dozen overseas buyers who are taking advantage of the rebate, which can only be applied for after construction is completed and the applicant is registered on the title.

A spokesman for the WA Department of Finance said as of December 17, “no applications have been received from a foreign buyer for an off-the-plan duty rebate”.

Local property industry experts agree that Perth, which is coming out of a five-year downturn, is on the cusp of an explosive growth period and that “people are going to make a lot of money” in the next two or three years.

But they caution that foreign buyers, including Chinese, still make up a tiny fraction of the market.

“There probably has been a doubling of interest from foreign buyers but (it’s gone from) 2 to 4 per cent maximum, and they come from all over the world,” said Paul Blackburne, founder of Perth’s largest luxury apartment developer.

“The market here is driven by local owner-occupiers. Overseas (buyers) are investors speculating on the market, and there is no doubt Perth is the best market for investing in Australia.”

Blackburne’s new $350 million Claremont development, The Grove Residences, has already half sold out within three months of launching.

“The last three months the market has gone crazy,” Mr Blackburne said.

“Having the 75 per cent rebate on off-the-plan helps but it was going to be a run anyway. COVID just delayed the upswing by six months.”

Peter Wright, founder of Realestate 88, said while foreign buyers were not “flocking” to Perth, the market was “definitely experiencing higher demand due to WA’s positive economic response to COVID-19”.

“Perth has always been a much more affordable place to buy in comparison to Sydney and Melbourne and now it appears national and international investors are waking up to this fact,” he said.

Marina East, a luxury waterfront development in Ascot with views over the Swan River to the CBD, has three-bedroom apartments selling for $700,000.

“Waterfronts of this nature are rare in Perth and we have had high interest from all buyer types,” Mr Wright said.

He noted that foreign investment fees and taxes as well as changes to foreign lending had “almost eliminated” international buyers from the market over the past few years.

“Perth has a large and long established local Chinese community and I would say that these buyers have definitely become more active in the past few months,” he said.

Due to a lack of new development during the downturn, Perth is facing an undersupply of about 50,000 apartments – much of the pent-up demand from Baby Boomers wanting to downsize.

Blackburne, which has averaged $200 million a year in sales over the past five years at lower margins, expects to hit $300 million next year.

The developer plans to increase prices by 10 per cent next year on all of its projects, and another 10 per cent by the end of 2021.

The tight rental market is another factor making Perth an attractive investment opportunity.

Vacancy rates are the lowest in four decades at 0.4 per cent – which is “basically zero” – and when the state government’s COVID-19 moratorium expires on March 28, Mr Blackburne sees rents increasing by at least 20 per cent.

“Our apartments are 45 per cent cheaper than Sydney or Melbourne yet rents are only 10 per cent less,” he said.

“Rental yields you’re getting 3.5 per cent in Sydney and Melbourne, here it’s 5 per cent already and going to 6 per cent soon.”

Economists have forecast that the Perth market will grow by at least 5 per cent annually for the near future, meaning an average-priced $400,000 home could see $60,000 growth in the next three years.

“People are going to make a lot of money in Perth over the next two to three years,” Mr Blackburne said.

“This is the beginning of a real boom in Perth.”

Real Estate Institute of Western Australia president Damian Collins said the body would be lobbying hard for the stamp duty and foreign buyer duty rebates to continue after October 21.

“In terms of sales it has had some moderate impact,” Mr Collins said.

“It certainly is something that in the long run we think is a good policy position. It’d be a crazy decision not to continue it.”

Mr Collins said the apartment market had picked up over the past six months but it was mainly still local buyers.

“The fact internationals can’t visit has potentially deferred some of that uptick,” he said.

“I would expect that coming out of the COVID environment, WA will become a popular place for people in the Asian region in particular wanting a safe zone to come. I would expect we would see into 2022 a much stronger pick-up in foreign buyers.”

Juwai IQI co-founder Georg Chmiel said while it “sounds strange to pay foreigners to buy houses and apartments, in fact it makes sense”.

“This is a triple win for Australia,” he said.

“These incentives will reduce the housing shortage, stimulate the economy with construction jobs, and protect the housing market from a sharp fall.”