New rules mean that some expats buying a home in Western Australia could be hit by a surcharge of 7% from next year.

The State's Treasury Department has outlined plans to introduce a surcharge of 7% for foreign buyers from January 2019, up from 4% that had been previously suggested.


However, the Real Estate Institute of Western Australia (REWA) is not happy about the plans which it believes will put buyers off and could affect the property market.

'This will deter much needed investment in the state, while doing nothing to make housing more affordable for West Australians, in fact rent prices could increase due to a lack of stock as investors look elsewhere,' said REWA president Hayden Groves.

'This policy measure also puts construction jobs at risk, as off-the-plan developments usually rely on securing a portion of pre-sales from foreign investors before funding can be secured. While this does not affect large-scale apartment development, it contradicts the WA Government's push for more medium density housing,' he pointed out.

'Deterring foreign investment means these projects may never eventuate, costing WA jobs. The short term financial gain of this surcharge is likely to be counteracted by long term losses as investors seek an alternative place to invest,' he added.

Such a charge exists in other parts of Australia, including 8% in New South Wales, 3% in Queensland and 7% in Victoria and South Australia.

The rise in the cost of buying for foreigners comes at a time when the housing market in the State capital Perth has been doing less well than elsewhere in Australia. Indeed, the latest figures from REWA show that sales fell in the second week of May, down by 1%. But this masks a fall of 3% in house sales and 7% fall in apartment sales as land sales kept the overall figure low with a rise of 14%.

In the first quarter of 2018 house prices in Perth have been more or less unchanged and REWI is forecasting only moderate price growth this year.

April figures from real estate firm CoreLogic also suggest that the market in Perth is stabilising. While prices are 2.3% lower than April 2017, they increased by 0.1% quarter on quarter and were flat month on month at $464,238.

The surcharge could also affect expats who have become Australian citizens. According to the Australian Tax Office it does not necessarily preclude expats from being required to pay the foreign investment charges.

'In some cases an Australian citizen who lives outside Australia may not be a resident for Australian tax purposes, particularly if they have been living outside Australia for an extended period,' and ATO spokesman said.

'In these cases, the Australian citizen may be a foreign investor for the purposes of these provisions and will not be granted a clearance certificate from the ATO if they apply. They will then have tax withheld on the sale of their property,' he added.