Property News, Insights & Education

    Addressing the Rental Crisis: New Ghost Tax Targets Foreign Investors

    • Treasurer does whatever it takes to get houses back on the market
    • Foreign investors face massive hikes for leaving their houses empty
    • 6 figure fees payable for ghost houses

    Do ghosts actually qualify as tenants?

     

    Not according to treasurer Jim Chalmers. 

     

    And he’s about to be the new Ghostbuster, sending them on their way for real tenants to move in. 

     

    Of course, the issue isn’t about real-life ghosts. 

     

    It’s about houses that are left vacant, where the only tenants might be ghosts. And with the chronic supply issues facing the country, it’s a move that should have been made a long time ago. 

     

    One of the easiest targets is foreign investors who purchase houses in Australia, and then leave them vacant instead of moving in or renting them out. 

     

    As it stands, foreign investors currently pay a fee to the Foreign Investment Review Board. 

     

    How much do foreign investors pay to own a ‘ghost house’ in Australia?

     

    The fee varies depending on a few factors.

     

    However, for a property up to $1 million, the typical application fee is $13,200, and double this for up to $2 million. 

     

    For $3 million, it doubles again. 

     

    They also pay an annual fee if the property is vacant for 6 months or more each year, which is the same as their original application fee. 

     

    They’re pretty significant fees, however, for some cashed-up multi-millionaires, they’re pocket money. 

     

    And they happily pay the fees and keep the house vacant. 

     

    This, of course, creates a problem because there’s one less house on the market available for a local buyer or renter. 

     

    So Jim Chalmers is going to hit them where it hurts. 

     

    His new policy will triple the application fee. 

     

    And if the property is left vacant for 6 months or more?

     

    The vacancy fee will be double the newly tripled fee. 

     

    For example:

     

    At the moment, if a foreign investor purchases a $1.5 million property, they are liable for a $26,400 application fee. 

     

    If they leave the property vacant, they pay another $26,400 fee that year. 

     

    However, under the new arrangements, it’s going to be painful to leave it vacant. 

     

    For the same property, foreign buyers will fork out a $78,600 application fee.

     

    And if they leave the property vacant?

     

    It will be an annual fee of $157,200.

     

    Dr Chalmers says, “These adjustments are all about making sure foreign investment aligns with the government’s agenda to lift the nation’s supply of affordable housing”.

     

    You can see why. 

     

    The cost to a foreigner of buying a house and leaving it vacant will be astronomical. 

     

    And they’re intended to push foreign investors to put their houses up for rent to avoid the annual ghost tax.

     

    A significant saving for them, and an extra rental property for us.

     

    It doesn’t end there, either. 

     

    The government doesn’t want to say farewell to foreign money. 

     

    They’re still an important part of increasing the housing supply. 

     

    So, to entice foreign investors further, Jim Chalmers also announced cuts to application fees for foreigners who invest in build-to-rent projects. 

     

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    Will this fix the housing crisis?

     

    The reality is this won’t fix the housing crisis.

     

    But it was never going to. 

     

    Between 2021 and 2022, there were only 4,228 foreign residential real estate sales, so we’re not talking big numbers to begin with. 

     

    And many of these are occupied anyway.

     

    But every bit counts. 

     

    And any home that suddenly appears on the rental market is one less we need to find. That’s a real family who now have a roof over their head, after all. 

     

    The way we see it, the fight to increase housing supply will be fought on many fronts. 

     

    And this small win is one of many the government needs to win.