The additional taxes and levies imposed on foreign investors, alongside tighter lending restrictions, have begun to take their toll on Australia’s apartment market, weakening demand, according to many prominent developers. If this downward trend continues, many new developments could be cancelled. 

According to Harry Triguboff, the billionaire real estate developer, higher charges on foreign buyers could see major developers exiting Australia’s apartment market altogether.

“It’s not bad, it’s very bad,” Triguboff told the Australian Financial Review. “When we start saying that stamp duty for foreign buyers should be 12% instead of 4%, that is called stupid.”

He also said that foreign buyer demand started to drop more than a decade back, which resulted in pre-sales price drops dramatically.

“Many of the Chinese can’t settle. So now we have to resell them –- there is another problem,” he said. “And everyone thought that the Australian buyer would come in when the prices started coming down –- they haven’t — I knew they wouldn’t –- it wouldn’t make any sense if they did.”

Jonathan Hallinan, founder and managing director of BPM, agrees with Triguboff, saying that foreign sales have been “almost non-existent” since stamp duty changes were implemented.

Gurner Real Estate Development founder Tim Gurner stated that foreign investors are more inclined to pay higher interest rates, and have stricter lending restrictions. As the supply decreases, this could lead to higher apartment prices. This could increase housing affordability concerns for many Australians, especially first-time buyers.

“There is no question the banks and government are pushing away foreign investors, which in turn will have a huge effect on Australian housing affordability as supply dries up significantly and demand continues to rise,” Gurner told the Australian Financial Review. “It’s the perfect recipe for another big run on house prices.”

Others analysts are skeptical of the conclusions drawn by these developers despite their warnings.

“While they are all very attuned to what’s being seen on the ground, it must be remembered that they have benefited from the strong increase in property prices and demand during Australia’s latest housing boom,” said David Scutt, global markets and economics reporter for the Business Insider Australia. 

“One could easily argue they are simply talking their own book, placing pressure on policymakers to lessen or even reverse recent measures so those trends can continue,” Scutt added. 

Recent data—both hard and soft—paints a very different picture.

According to the ANZ/Property Council Survey for the March quarter, foreign demand doesn’t appear to be “falling off a cliff,” at least not yet.

According to respondents, the percentage of foreign buyers buying US homes declined in all the states in the quarter 2017 but this was not a significant decline.

Respondents reported that 18.1% of properties in NSW were sold to foreigners. This is down from 21.6% as per previous surveys. Victoria saw 21% less than quarter one, which was 21.6%.

In Queensland,  the proportion fell to 13.8%, down from 15.4% and well below the 20.4% level seen in 2016. 

“So while true that the proportion of sales to foreigners is falling, it still represents a significant amount, especially in New South Wales and Victoria where the vast bulk of apartment development is occurring,” Scutt said.

“From a broader perspective, and despite the concerns being portrayed by these developers, overall confidence levels in the ANZ-PCA survey held near the highest level on record.”