Foreign buyer surcharges: do they actually make housing more affordable?

Every state government in Australia will tell you the same thing: foreign buyers are part of the reason you can't afford a home, and taxing them harder is part of the solution. It's a politically easy argument - blame the outsider, collect some revenue, and look like you're doing something about the housing crisis. But is any of it actually working?

What are foreign buyer surcharges?

Foreign buyer surcharges are additional stamp duty and land tax charges applied to non-resident, non-citizen purchasers of residential property in Australia. They sit on top of whatever stamp duty an ordinary buyer would pay.

Here's what each state currently charges:

So in New South Wales, a foreign buyer purchasing a $1.5 million home would pay $120,000 in surcharge alone - before a cent of regular stamp duty. Victoria introduced its surcharge in 2015, and most other states followed within a few years. The federal government also requires Foreign Investment Review Board (FIRB) approval for most residential purchases, with application fees ranging from $4,200 to over $100,000 depending on property value.

Why governments introduced them

The policy emerged from a very real political pressure cooker. Between 2010 and 2017, median house prices in Sydney and Melbourne roughly doubled. Foreign investment - particularly from China - became a lightning rod for public frustration. Data from the FIRB showed foreign buyers were approving tens of billions in residential real estate annually: $72.4 billion in 2015–16 alone.

Politicians from both Labor and the Coalition latched onto this as a wedge issue. Surcharges were framed as "making the market fairer for Australians" - a message that polled extremely well. The revenue wasn't bad either. Victoria alone collected over $1.4 billion in foreign buyer surcharges in the four years following their introduction.

So the policy exists for two reasons: it's politically popular, and it raises money. Whether it actually helps first home buyers is a separate question entirely.

The evidence: does it work?

Here's where things get uncomfortable for state governments. The honest answer is: not really, or not nearly enough to matter.

• Foreign buyers are a small slice of the market. Even at peak activity in 2015–16, foreign residential purchases represented around 5–7% of new dwelling approvals nationally. They were never driving prices on their own.
• Surcharges did reduce foreign buying activity. FIRB data shows foreign residential approvals dropped sharply after surcharges were introduced - from that $72 billion peak to around $17 billion by 2019–20. So the policy achieved its stated aim of reducing foreign demand.
• Prices kept rising anyway. Sydney's median house price was around $900,000 when Victoria introduced its surcharge in 2015. By 2022, it had crossed $1.4 million. Melbourne, Queensland, and WA all followed the same trajectory. Removing a 5–7% demand slice from the market did not produce the affordability outcomes implied by the policy.
• The real drivers were ignored. Interest rates at historic lows, chronic undersupply of new housing, restrictive zoning laws, negative gearing tax benefits, and population growth in capital cities were all far larger contributors to price growth - and far more politically difficult to address.

Research from the Reserve Bank of Australia and independent economists including those at the Grattan Institute have consistently pointed to supply constraints as the dominant factor in Australian housing unaffordability. Foreign buyers barely register as a variable in those models.

Who actually gets hurt?

The surcharges have some unintended consequences worth naming.

Developers of new apartments - who rely on foreign presales to fund construction - have found it harder to get projects off the ground, particularly in Queensland and NSW. Fewer apartment towers being built means less housing supply overall, which pushes prices up for everyone. In a cruel irony, a policy meant to help buyers may have contributed to less housing being built.

There's also the impact on permanent residents who haven't yet gained citizenship, temporary skilled workers, and international students - many of whom have lived and worked in Australia for years and are trying to put down roots. They face surcharges even when they're contributing economically and have strong ties to their communities.

Why does this policy persist if it doesn't work?

Because it's politically costless to keep it. Foreign buyers don't vote. Blaming overseas investors plays well in focus groups. And the revenue - while modest in the context of state budgets - isn't nothing.

Both major parties have doubled down on the rhetoric. Labor governments in Victoria and Queensland have increased surcharges in recent years, with Victoria lifting its stamp duty surcharge to 8% in 2022. Federal Labor's 2023 foreign buyer restrictions (banning foreign purchases of established homes for two years) followed the same template: visible action, unclear impact.

Meanwhile, the structural reforms that economists actually recommend - relaxing zoning, increasing density near transport hubs, winding back negative gearing, building more social housing - remain politically toxic because they directly affect existing homeowners who do vote, and vote in large numbers.

This is exactly why direct democracy matters

When you ask Australians what they want from housing policy, the answers are more nuanced than politicians assume. Yes, people want a fair go - but they also want real solutions, not scapegoating dressed up as reform.

Under the current system, both major parties can run on "tough on foreign buyers" because it wins votes, regardless of evidence. There's no accountability mechanism that forces them to address the harder, more effective reforms.

Direct Democracy changes that equation. When members vote directly on policy - and elected representatives are bound to follow - the conversation has to be honest. You can't just tell people what they want to hear. The evidence has to be on the table.

If Australians were given the full picture on foreign buyer surcharges - what they cost, what they raise, and what they actually achieve - and then asked to vote on housing policy priorities, we believe they'd choose differently.

---

Want a say in how Australia's housing policy is actually made? Take our [policy quiz](https://directdemocracy.com.au/quiz) to see where you stand on the issues, or [join Direct Democracy](https://directdemocracy.com.au/join) and start voting on the policies that shape your life.