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Foreigners facing tax hike on residential sales, but cost could ‘spook’ buyers

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Foreign investors buying residential real estate in Tasmania will be slapped with thousands of dollars in taxes under a Liberal plan to "level the playing field".

But the policy has been criticised by the Property Council, which said it would do nothing to alleviate housing stress and could spook investors.

House sold

With Tasmanians going to the polls on March 3, Treasurer Peter Gutwein has announced a re-elected Liberal Government would introduce a tax on international purchases of land and residential properties, in an effort to improve housing affordability in a booming market.

"We have one of the most vigorous real estate markets in the country and this has created challenges," Mr Gutwein said.

"There's increasing interest from foreign investors in Tasmania and we want to level the playing field."

The tax, touted as the Foreign Investor Surcharge, would see an additional 3 per cent in property transfer duty on all purchases of residential property by foreign residents and 0.5 per cent on all purchases of primary production land.

"This will ensure foreign investors who don't normally pay a range of state taxes contribute a fair share to the economy," Mr Gutwein said.

That means, a foreign investor would be taxed an extra $12,000 on a $400,000 property, making the total tax take of $26,000.

Locals taking lion's share of sales

According to the latest Real Estate Institute of Tasmania (REIT) figures, Tasmanian buyers still dominate the market and account for 75 per cent of all sales.

In 2017, there were 11,353 residential property sales, the highest in a decade.

Of those, interstate buyers made up 20 per cent, and foreigners bought 61 of the properties, according to the REIT.

Townhouses

The Property Council's Brian Wightman said he was disappointed by the announcement.

"We don't believe a foreign investor tax will do anything to alleviate the housing affordability stress in Tasmania," Mr Wightman said.

"When you put in place direct taxes, it can have an impact on the market, we'd be concerned that foreign investment would drop off and housing affordability would not improve at all."

Tax could 'spook' investors, real estate group warns

The Liberals have also promised to give first homebuyers a half price discount on stamp duty.

Tasmanian Labor has said it backs the plan, while the Greens said the Government was "playing catch up on the growing level of foreign ownership and influence in Tasmania".

"Tasmanians know foreign investors are impacting on the housing market and that almost 25 per cent of our agricultural land has some level of foreign ownership," Greens leader Cassy O'Connor said in a statement.

"Cashed-up overseas buyers are not going to be dissuaded by a small tax hit.

"The Liberals' policy will make no difference to housing availability, nor will it mean any less agricultural land ends up in foreign hands," she said.

Mr Wightman said foreign investment was important for the state's future.

"We wouldn't want to spook them or discourage them from investing in Tasmania."

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