Foreigners and expat home owners are spearheading the start to this year’s prestige market as they rush to sell up before new laws take effect scrapping their tax exemption entitlements.
Agents say vendors have given them until June 30 to sell and settle on the sale of countless properties before proposed laws are enacted removing the capital gains tax exemption for foreigners and non-resident Australians.
“Vendors see now as a good time to divest their property because there’s been amazing growth in values in recent years but also because for many of them the new laws mean any capital gain they’ve made on the property will be lost,” said Elliott Placks, of Ray White Double Bay.
“We expect a flurry of property to hit the market in the next six to eight weeks to give vendors enough runway to sell and settle before the changes take effect,” Mr Placks said.
The amended Treasury Laws Amendment Bill was part of a raft of housing affordability measures announced in 2017 and introduced to Parliament early last year but is yet to pass the Senate.
Treasurer Josh Frydenberg said in a statement: “The government is continuing to progress this legislation as planned.”
But shadow assistant treasurer Andrew Leigh said issues remain around the retrospect nature of the tax entitlements that need to be resolved.
“This process is just one of many instances where the Coalition has bungled housing policy,” Mr Leigh said.
Mosman agent Michael Coombs, of LJ Hooker Avnu, first became aware of the potential changes through a UK-based client early last year when the legislation was first introduced.
“My clients loved their house, and they wanted to return to live in it eventually, but the new and changing tax regime at home interfered with their long-term plans to hold on to it,” Mr Coombs said.
The Hamptons-style residence on almost 3000 square metres in Clifton Gardens sold for $12.2 million.
Neil Matthews, the founder of eastern suburbs law firm Matthews Solicitors, said the new legislation was particularly draconian for non-residents Australians.
“If you have owned a house in Sydney for the past, say, 20 years and you’ve been posted to New York for the past three years, then there’s no apportionment or credit on the tax concession for the many years in which the property was your primary residence,” Mr Matthews said.
The new tax law is also deterring expats buying into the market, said Christie’s International’s Ken Jacobs.
“Traditionally when the Aussie dollar hits a low of 70 cents — as it did this week — there would be a strong show of interest from expats,” he said. “But that isn’t happening. In fact, there are sales that haven’t transacted purely because of the tax implications on these buyers.”
Prestige sales results in the past year have been buoyed by strong demand and low stock levels. However, buyers’ agent Deborah West says a significant jump in vendor listings could have a negative impact on values.
“The only thing that keeping a floor under the $5 million-plus market is the chronic lack of decent property for sale,” Ms West said.
Brett Evans, managing director of expat financial services specialists Atlas Wealth management, said almost half the firm’s clients indicated the recent tax changes deterred them from buying back into the Australian property market.
Double Bay-based agent James McCowan, of Sotheby’s International, said one of his vendors is selling because the impact of the tax changes means it was not worthwhile keeping the property while they work overseas and do not plan to return to live in it.
“There’s a six-year limit that applies to expats, but unless they plan to return to live in the property within that time frame, then they lose the tax benefit, so it makes more sense for them to sell now,” he said.
Looking to sell your property? Contact us so that we can help you achieve your Real Estate goals