Global investment into the Victorian property sector has dropped sharply, falling from over $10 billion to $5 billion in three years - a drop of 53 per cent, a new report finds.
The Mandala Partners report, commissioned by the Property Council of Australia, reveals institutional investment into commercial and large-scale residential property developments has dropped significantly, with Victoria now attracting around 40 per cent less global investment per capita than NSW.
The report examines the impact land tax surcharges have on large investors, like American pension funds who invest in large-scale housing developments, not individuals from overseas who buy a family home. Global capital, in partnership with local developers, is critical in delivering state-shaping assets like office buildings, industrial parks, shopping centres and new homes for Victorians to rent and buy.
If Victoria's absentee owner surcharge on global investors was slashed, the state could cash in with $5.7 billion in extra investment, $2.5 billion in GDP and 5,900 new jobs by 2030 – about the same number of jobs created as the entire West Gate Tunnel Project.
The report also reveals scrapping similar taxes on global investors nationwide could inject an $8.1 billion investment windfall across Australia, create 8,400 jobs and grow the country's GDP by $3.6 billion by 2030.
Property Council's Executive Director, Capital Markets Torie Brown said the benefits of scrapping taxes on global investment far outweighed the cost for government coffers and would unlock more housing and other property development.
"The benefits of abolishing the absentee owner surcharge on global investors in Victoria far outweigh the cost as it would deliver up to $10 in economic activity for every $1 it costs the Budget.
"While these taxes were initially introduced to limit the ability of foreign nationals to buy up established houses they wouldn't live in, these taxes also significantly stymie the money needed to supply new Australian property, including housing and new commercial developments.
"We believe that global investors who want to deploy capital to build homes and city precincts at scale should be encouraged, not turned away."
"International investors love Australia. They are often willing to take on more risk than local investors, they partner with local businesses and create Australian jobs, and they are behind some of our most iconic landmarks. Global investment needs to play a pivotal role in powering and growing our property sector.
"This is not about crowding domestic investment out, but is about using other people's money to build world-class Australian cities for our local benefit - just as we've been doing since the Second World War.
"Global investors go where they are welcome, but Victoria has shut the door."
Queensland also saw a slide in investment after its 2020 foreign surcharge increased, despite strong economic conditions and excitement over the Olympics, pointing to increasing taxes as a growing deterrent. QLD stands to gain a $1 billion boost and 1,000 jobs if it removed its foreign surcharge.
"State governments should look at the bigger picture - rather than taxing to support their bottom line, they should encourage investment to support their economy," Ms Brown said.
"Investors are sophisticated. They want to invest in states where policies are predictable and taxes are fair.
"Removing these taxes will unlock long-term growth, create jobs and build the homes, employment lands, student accommodation, shopping centres and other assets Australia needs.
"It is time to bring global investors back in full force and remove these taxes."
Property Council Victorian Executive Director Cath Evans said removing foreign investor surcharges would unlock new housing supply, attract major institutional partners back to the state, and help deliver the commercial projects that Victoria desperately needs.
"These taxes are holding back billions of dollars that could be creating jobs, housing and infrastructure right here in our state.
"Victoria has traditionally been a magnet for global capital. We need to see urgent tax reform to ensure it remains a powerhouse of Australia's economy."
