Australia property investors face rising taxes and valuation risks

Australian property investors are facing significant headwinds due to shifting tax policies and rising costs. Data from Loan Market Group indicates a 24% drop in new home mortgage demand since January, with some markets seeing investor loan applications fall by as much as 44%.

Tax reforms introduced by the Labor government are impacting investment strategies. While incentives for new builds remain, many investors are opting for existing properties. Concerns regarding high construction costs, potential delivery delays, and valuation discrepancies are deterring buyers from new developments. Experts warn that if bank valuations fall below purchase prices upon completion, buyers may face funding shortfalls.

Additionally, rising land surcharges for foreign owners are driving some overseas investors to exit the market. In New South Wales, the land tax surcharge for foreign owners has increased significantly, reaching 4% in 2023 and projected to hit 5% by 2025. Some investors have also been hit by retroactive tax assessments, leading to decisions to sell properties at a loss to mitigate further financial strain.