The state government recently introduced draft legislation to parliament that intends to place a seven per cent ‘foreign buyers tax’ on residential property purchases, commencing in January 2019.

Penalising those from overseas seeking to invest in residential property in WA might seem like a simple way for the state to raise revenue, but look further and the ramifications of this proposed tax could be extremely detrimental to the property market recovery in WA and indeed the broader economy.

This is a big risk to take for what is essentially a small gain. The government estimates it will raise just $123 million over four years from the new tax.

Putting that into perspective, the property industry contributes $30.45 billion annually to our economy and the industry also employs approximately 225,000 Western Australians.

Without a strong land and housing development industry, we will see job losses and significantly less money flowing into the state’s economy.

Currently, foreign buyers constitute a very small percentage of investment in residential property. Encouraging further investment would go some way to boosting our market recovery, and the fact that WA does not have a foreign buyers tax currently gives us a competitive advantage over those states that do.

UDIA suggests the government would be wiser to look at a broader review of property tax in WA to ensure a more secure and consistent revenue stream in the longer term.

Our suggestion is that the government consider a broad-based land tax regime that replaces things like stamp duty and any foreign buyers tax altogether.

A broad-based land tax system would be less impacted by the peaks and troughs of the property market cycle and provide a stable income revenue stream over the long term rather than penalising one specific group.

In that respect, it is pertinent to consider who foreign investors actually are.

They could be those on 457 visas who are contributing to our economy and potentially seeking to buy a home that they can live in while they work here. Or maybe an international student whose parents want to purchase a home for them to stay in while they study here.

It could be someone who has a partner from overseas and they’re seeking to purchase a property together.

Overall, it is important to look at the big picture when considering implementing new taxes and consider the ramifications it could have.

In this case, penalising a small group to secure a small revenue stream, at the cost of losing their potential to contribute to our economy more broadly, is ill advised.