CONTRIBUTED BY JULIE SCOTT
The latest prediction that Malaysians will reconsider investing in Australia comes off the back of another prediction in 2016 by Jon Ellis, founder of Investorist who suggested Chinese property investments would fall by $15 billion by the end of the year.
Overpriced properties, growing taxes and stamp duties, and the banks’ reluctance to loan money to foreign applicants all play a part in the shift in mindset. Melbourne-based Strata Expert, David Byers from Abacus Strata, believes the legislative changes could impact all property investors in Australia since it will affect property demands.
Malaysians have always had close links with Melbourne. 77% of Malaysia’s richest families send their children abroad for university, with many choosing Melbourne for their education. In addition, over the past 3 years, there was a 40% growth in the number of Malaysians visiting Australia.
As a result of this and the phenomenon of Sydney’s property prices skyrocketing, Melbourne became the next best investment opportunity for foreign investors.
Malaysia’s developers SP Setia lodged plans for a $640 million twin tower project in central Melbourne, while OSK Property put in a $2.8 billion bid for a development project in Melbourne’s Southbank. They were some of the biggest investors in the Melbourne market.
However, as Melbourne has begun to experience the same hitch in property values as Sydney, it is now well on its way to becoming just as expensive as its New South Wales Counterpart.
The Stamp Tax duty currently stands at 12% in Victoria, which is the highest rate in all of Australia. This means that more and more foreign investors are reconsidering the city as a sound investment and it is feared that there will be fewer large investments made by the Malaysia’s investors.
The federal government measures have recently been introduced to crack down on the number of properties in Australia owned by foreign investors.
The new laws surrounding foreign ownership state that when migrants move to Australia they are permitted to purchase already established properties to live in, but once they leave the country, they must sell their properties.
The laws were designed to encourage migrants to rent properties and allow more domestic buyers to purchase and own properties. However, with much of the current property market being made up of foreign investors, it is feared that the government initiative could ice out some of the largest investors in the Australian economy.
Another discouragement for Malaysian investors is the Vacant Property Fee which demands all owners of empty properties must pay a fee for keeping their properties without letting them out – something that many foreign property owners do as they use the properties as holiday homes.
A final hurdle that Malaysian investors have to jump is acquiring a loan. In alignment with the federal proposal to cut down on foreign ownership, Australian banks are making it more and more difficult for foreign investors to attain the loan they need to purchase Australian property.
However, many property investment experts remain optimistic that the drop in investment in Melbourne and Sydney won’t be devastating for the country as a whole.
Many are confident that hot spots in Queensland, such as Brisbane and the Gold Coast, could receive a huge boom in economic investment.
A recent research conducted by HSBC found that a quarter of Asian and Malaysian investors looking to buy property in Australia over the next year intended to buy in Queensland.
Property prices in Queensland remain affordable and steady, hence it can be hugely profitable areas for investment. Queensland also opted out of levying more stamp duties, so investors of the area won’t be hit as hard by taxes and payments that can cripple the finances.
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