Property Tax Surcharges Open Doors for Local Investors

Rising foreign investor surcharges in Victoria and Queensland are reshaping the commercial property landscape, presenting new opportunities for local investors. As international buyers retreat due to these higher levies, local investors are stepping in to acquire assets at more favourable prices.

Fund manager Richmond Bridge is among those capitalizing on this shift. The firm, which manages $1.9 billion in assets, has raised approximately $150 million in equity for a $200 million fund. With 50 percent leverage, the fund will have up to $400 million to purchase a portfolio of 10 to 15 commercial properties, primarily in Brisbane and Melbourne.

“We’re targeting domestic investors to acquire high-quality, well-located assets that are currently undervalued due to the lack of foreign buyer competition,” said managing director Peter Wylie. He explained that Victoria’s 4 percent and Queensland’s 3 percent foreign ownership surcharges can reduce returns for offshore buyers by up to 1 percent, discouraging their participation.

While some analysts caution that industrial real estate may face a downturn due to incoming supply and potential rental drops of up to 11 percent, others remain optimistic. Australia continues to be seen as a safe and attractive investment destination, thanks to strong infrastructure, governance, and population growth.

Wylie noted that foreign investors are being hit particularly hard as land valuations—typically around 30 percent of a property’s value—have surged by up to 50 percent. For example, a $60 million property now might have a land valuation of $20 million. For foreign owners, this could mean an additional $600,000 in annual land tax, effectively reducing yields by 1 percent.

Window of Opportunity for Local Capital

Wylie believes this trend won’t last forever. “Eventually, foreign investors will adjust and return, but in the meantime, this period offers a prime opportunity for domestic buyers to act amid reduced competition,” he said.

Sass Jalili, head of industrial and logistics research at commercial agency CBRE, echoed this view, saying international investors are reconsidering their approach to Australia. Many are shifting their focus toward New South Wales and Western Australia, where surcharges are either lower or non-existent. Others are partnering with local fund managers or participating earlier in development phases to stay active in the market while avoiding full tax exposure.

This situation highlights how state-level property taxes can significantly influence capital flows. In Victoria, property taxes are projected to make up 47 percent of the state’s total tax revenue within four years, according to recent budget documents. Queensland’s budget will be released next month.

Selective Interest in Victoria

Not everyone is bullish on Victoria. Shane Quinn, chairman of fund manager Quintessential Equity, said the firm is only considering opportunities in the industrial sector, where foreign capital has pulled back the most. “We’re eyeing land-rich industrial assets with the heaviest foreign tax burden. If the pricing is right, we may act within the next 12 to 18 months,” he said.

Unlike Victoria and Queensland, New South Wales does not impose a foreign owner surcharge on commercial assets, making it more attractive to offshore investors. Western Australia also differs, applying only a metropolitan region improvement levy.

“In this climate, institutional capital is becoming more strategic about jurisdictional costs,” said Jalili. “For offshore investors, partnering with a local platform could be a smart way to stay active while managing tax exposure.”