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{{propApi.successMessage}} {{region}} Change locationNSW takes first step toward unwinding housing's worst own goal
NSW takes first step toward unwinding housing's worst own goal
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“The NSW Government has taken an important step toward improving housing supply. Other states should now follow its lead and remove foreign investor taxes that discourage the construction of new homes,” said HIA Chief Economist Tim Reardon.
Thursday, 25th June 2026
The NSW Government's decision to remove the 9 per cent foreign purchaser duty surcharge for eligible build-to-rent and retirement living developments is a welcome recognition that foreign investor taxes can impede housing supply.
“Unlike many housing policies that merely reallocate an existing pool of domestic investment, foreign investment increases the total pool of capital available to the Australian economy.
“For more than a decade, governments have imposed increasingly punitive taxes on foreign investors under the mistaken belief that doing so would improve housing affordability.
“The reality is that foreign investors have been prohibited from purchasing established homes in Australia since 1975.
“Taxing foreign investment in new housing does not reduce demand. It reduces the amount of capital available to build homes.
“Their role in the residential market is overwhelmingly concentrated on financing, developing and constructing new housing.
“That is why the NSW decision is so significant. It recognises that housing supply objectives and foreign investor tax settings can be in conflict.”
“NSW and Queensland have already introduced reforms to streamline and expand relief arrangements for new detached residential development projects.
“NSW has now extended relief to major build-to-rent and retirement living developments.
“The direction of travel is becoming increasingly clear.
“Governments are gradually creating exemptions and workarounds because they recognise these taxes are preventing housing from being built.”
"If foreign investor taxes require exemptions for residential development, detached housing, build-to-rent and retirement living, why should they continue to apply to any investment that demonstrably increases housing supply?
“Every additional source of capital means more projects reaching financial close, more construction activity and more homes being built.
“That means more jobs, more economic activity and ultimately more revenue flowing to governments through GST, payroll tax, income tax and company tax.
“These taxes were introduced as revenue measures, but there is a growing case that they are revenue negative.
“When projects do not proceed, governments lose far more than a foreign purchaser surcharge. They lose the GST, payroll tax, income tax and company tax associated with the homes that were never built.”
“Governments are currently spending billions of dollars attempting to increase housing supply.
“At the same time, they continue to impose taxes that actively discourage private capital from building homes.
"When these taxes were introduced a decade ago governments were concerned about foreign investment, vacant dwellings and housing affordability. As better data and analysis shows these concerns to have been fictitious the policy position also needs to change.
“The potential housing supply benefits from removing foreign investor taxes on new housing could exceed those of many of the headline housing initiatives announced in recent budgets.
“This is the easy win.
“It requires no new government spending.
“It increases housing supply.
“It creates jobs.
“It raises government revenue.
“And it does so without increasing foreign competition for established homes because foreign investors remain prohibited from purchasing them.
“Foreign investor taxes have become one of the worst own goals in Australian housing policy.
“The NSW Government has taken an important step in recognising that reality.
“Now it is time for every other state and territory to follow,” concluded Mr Reardon.
“Unlike many housing policies that merely reallocate an existing pool of domestic investment, foreign investment increases the total pool of capital available to the Australian economy.
“For more than a decade, governments have imposed increasingly punitive taxes on foreign investors under the mistaken belief that doing so would improve housing affordability.
“The reality is that foreign investors have been prohibited from purchasing established homes in Australia since 1975.
“Taxing foreign investment in new housing does not reduce demand. It reduces the amount of capital available to build homes.
“Their role in the residential market is overwhelmingly concentrated on financing, developing and constructing new housing.
“That is why the NSW decision is so significant. It recognises that housing supply objectives and foreign investor tax settings can be in conflict.”
“NSW and Queensland have already introduced reforms to streamline and expand relief arrangements for new detached residential development projects.
“NSW has now extended relief to major build-to-rent and retirement living developments.
“The direction of travel is becoming increasingly clear.
“Governments are gradually creating exemptions and workarounds because they recognise these taxes are preventing housing from being built.”
"If foreign investor taxes require exemptions for residential development, detached housing, build-to-rent and retirement living, why should they continue to apply to any investment that demonstrably increases housing supply?
“Every additional source of capital means more projects reaching financial close, more construction activity and more homes being built.
“That means more jobs, more economic activity and ultimately more revenue flowing to governments through GST, payroll tax, income tax and company tax.
“These taxes were introduced as revenue measures, but there is a growing case that they are revenue negative.
“When projects do not proceed, governments lose far more than a foreign purchaser surcharge. They lose the GST, payroll tax, income tax and company tax associated with the homes that were never built.”
“Governments are currently spending billions of dollars attempting to increase housing supply.
“At the same time, they continue to impose taxes that actively discourage private capital from building homes.
"When these taxes were introduced a decade ago governments were concerned about foreign investment, vacant dwellings and housing affordability. As better data and analysis shows these concerns to have been fictitious the policy position also needs to change.
“The potential housing supply benefits from removing foreign investor taxes on new housing could exceed those of many of the headline housing initiatives announced in recent budgets.
“This is the easy win.
“It requires no new government spending.
“It increases housing supply.
“It creates jobs.
“It raises government revenue.
“And it does so without increasing foreign competition for established homes because foreign investors remain prohibited from purchasing them.
“Foreign investor taxes have become one of the worst own goals in Australian housing policy.
“The NSW Government has taken an important step in recognising that reality.
“Now it is time for every other state and territory to follow,” concluded Mr Reardon.
Download HIA's Unravelling of Australias Foreign Investor Tax Regime From workarounds to reform
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