Australians may be more willing to consider parking their money in more investor-friendly real estate markets such as the United Arab Emirates and New Zealand following Labor’s property tax shake-up, according to industry figures.
Neither the UAE nor New Zealand imposes the extent of taxes levied on property investments that Australia does, including through a capital gains tax on real estate or land tax, respectively, they said.
Among those with skin in the game is real estate agency Whitefox, which has operated across Australia since 2017. It opened its first office in New Zealand in 2023 and an agency in Dubai earlier this year.
“Australia’s proposed tax changes are becoming increasingly punitive for property investors,” Whitefox founder Marty Fox told The Australian Financial Review. “Already 30 per cent of our transactions in New Zealand are from Aussies and that will likely go up for Wanaka and Queenstown.”
Fox, who is himself in the process of applying for a loan to purchase property in Dubai, said the UAE city had emerged as one of the world’s most “tax-efficient property markets for globally mobile investors”.
It is one of the reasons why Australian property investors, like Fox, may be more willing consider turning their real estate lens onto foreign markets following Labor’s decision to abolish negative gearing and axe the 50 per cent discount on capital gains, unveiled in its May 12 budget.
The United Arab Emirates doesn’t impose income tax or capital gains tax on individuals. Residential rental yields in Dubai also average around 6 to 8 per cent, compared with Sydney, where typical rental yields sit at about 2 to 4 per cent.
Australian investors may qualify for a UAE Golden Visa – a renewable five-year or 10-year residence visa – if they purchase property worth a minimum of $AED2 million (about $766,000) upfront, using a loan from specific local banks, or off the plan through an approved local real estate firm, according to Henley & Partners.
Nahi Beaini, director of Sydney-based buyers agency Dubai Property Playground, said there had been a significant number of inquiries from Australians wanting to purchase Dubai property more recently, mainly from investors wishing to diversify their assets and also because of its investment into AI and data centres.
“Dubai has always been a destination to invest, even before the [latest Australian federal] budget, but the new compliances and rules around the budget just makes it more compelling to invest in a place such as the UAE,” he said.
“We’re definitely expecting, especially from people who are first-time investors, [for inquiry to accelerate] over the next few months. There’s a lot of people talking about it, but it’s still early stages.”
While the war in the Middle East has disrupted that investment in the past few months, Beaini said would-be investors were looking past that to planning investment decisions in the future.
In New Zealand, some of the benefits of owning property include no stamp duty or national land tax. Landlords can also claim 100 per cent of their mortgage interest as an expense.
However, under what’s called the bright-line rule, any profit made from selling a property within two years of its acquisition is subject to tax, except if it’s a person’s primary residence.
Fox is expecting a pick-up in inquiries from Australians wanting to invest in Dubai and New Zealand’s real estate markets following the property tax changes.
“Investors are not necessarily leaving Australia because they dislike property,” he said. “They are increasingly questioning whether the after-tax environment still rewards ambition, risk and long-term investment.
“Markets like New Zealand and Dubai are benefiting from being perceived as simpler, more stable and significantly more investor-aligned.”
However, a note of warning was sounded by Mark Molesworth, tax partner at professional services firm BDO, who said if an individual was living in Australia, it was much more likely that they would be treated as an Australian tax resident, who is taxable on their worldwide income.
“You’re subject to tax in Australia on rent, even if it’s derived from a rental property offshore, and you’re subject to tax on the capital gain that you make, if any, on the sale of that property,” he said.
“If an investor is looking to invest in Dubai property on the basis that it will be more [favourably] taxed than Australian property, then that’s not correct from an Australian tax point of view.”