In recent times the political focus in Australia has been on a so-called “housing crisis”. The controversy has been driven by high rates of immigration and slow construction approval times.
In New South Wales, the most populous State, the situation is acute. The government has made a series of policy announcements to encourage new dwelling construction primarily in the greater Sydney region.
These announcements include a new dual-occupancy policy (which permits two dwellings on all low-density zoned property); a Low and Mid-Rise Housing Policy for selected area (allowing up to six storey apartments); a Transport-Oriented Development Program permitting higher-density apartments around transport hubs; and a Housing Delivery Authority to offer an accelerated approval process for major developments.
On the other side of the coin, the various State governments (of which there are six, plus two Territory governments) have taken measures to deter residential land purchases by investors from outside Australia. Ther thinking is that offshore parties are crowding out local residents, thereby contributing to the housing crisis. Once again we will take New South Wales as an example.
In 2025 the State government implemented two measures affecting foreign investors in residential real estate: firstly to increase both property transfer tax (called ‘conveyance duty’ ) and secondly to increase land tax.
So, for example, on residential land valued at A$1.24 million (the current median house price in Sydney being approximately $1.1 million), the property transfer tax (for historical reasons called stamp duty) is 5.5% of the purchase price. But from 2025, for properties worth $3.7 million and above, conveyance duty has increased to 7% for all purchasers, whether local or offshore.
Further, there is now a foreign purchaser surcharge of 9% on conveyance duty. This means that an offshore investor in residential real estate in New South Wales would potentially face a one-off, up-front government charge of 16%, an astonishingly large impost when considered against even the recent past.
Secondly there is a State land tax, and annual charge on what the government calls the unimproved capital value (“UCV”) of a property (that is, the land excluding the dwelling). The State assesses the UCV, which is usually substantially below the market value of the property plus residence. However residents are not assessed to land tax on the property where they live, only on any other properties they held say, for investment purposes).
Now, deemed foreign investors (as defined) must pay a land tax surcharge on any properties they own (whether for residential or investment purposes) at 5% per annum. This makes a total annual land tax bill for the foreign investor at 7% per annum. Once again, a substantial increase on what had prevailed up to only recently.
In conclusion, it is apparent that, for potential offshore investors in Australian real estate (in any State or Territory) the economics of the transaction have changed considerably. Greater tax imposts have to be factored into the yield equation so as to establish whether the proposed transaction still makes economic sense.
Allan McDougall
Consulting Principal
Keypoint Law, Sydney
March 2026