Changes to Australia's GST on management and maintenance are not expected to curb buying enthusiasm Foreign investors considering whether to dive into Australia's softening property market next year will have another factor to consider - the 10 per cent goods and services tax (GST) on all property management and maintenance. Under the original GST legislation (enacted in 2000), foreign investors and non-resident Australians were exempt from paying GST on agents' fees and for some maintenance services, such as electrical work. But according to Alison Verhoeven, spokeswoman for the Real Estate Institute of Australia (Reia), the rules were confusing - and applied inconsistently. 'You had, for example, an exemption on electrical work but people still had to pay GST for plumbing services,' she said. On advice from the Australian Taxation Office, the government has moved to eliminate the anomalies, with the result that from the beginning of next year the exemption will disappear, adding extra costs for foreign investors and non-residents. 'This is just a legislative amendment for the sake of consistency,' Ms Verhoeven said. 'I doubt it is going to have much of an impact on people's investment decisions.' Under the original GST legislation, the 10 per cent tax applied only to the sale of new property and not established dwellings. With the market off its highs, the GST will be only one of several factors driving investment decisions next year. Market analysts agreed that after several years of rampant price growth the boom was over, but they disagreed on how the next phase would unfold. 'The market is holding up but it has certainly not crashed, and with the receding likelihood of interest rate hikes, we may be in the lull before another boom,' said one Brisbane property agent, reflecting the cautious optimism returning to the industry. With the Australian dollar nudging 80 US cents and property prices already off the boil, most analysts believed the chances of the Reserve Bank of Australia tightening monetary policy until mid-next year were now remote. If the interest rate growth was not as steep as the market feared, investors should wade back into the market with renewed confidence and continue to push prices higher, especially in the growth markets of Queensland and Perth, which have continued to hold firm while other markets, such as Sydney and Melbourne, have slipped back. The other good news for foreign investors is that rental yields, which have been subdued by a glut of new property, could be on their way back next year, compensating for extra costs such as the GST on management and maintenance. Foreign investors continued to be active in key Australian markets in the latter part of this year, despite predictions of a slowdown. In Perth, for example, real estate agents were expanding their networks of overseas sales contacts to generate more business from foreign investors. FPDSavills in Perth reported recently that foreign investment had reached 30 per cent in some Perth developments, with the most interest coming from South Africa and Britain. In Queensland, which continued to be the most active market for foreign investors, the state government released figures showing foreign investors had acquired A$597 million ($3.6 billion) in land acquisitions in 2003-4, up from A$475 million the previous year. The British were the most active, and were responsible for purchases in Queensland worth A$152 million, followed by investors from Japan, the United States, Germany and Hong Kong. On Queensland's Gold Coast, a popular investment area with many new apartment developments, Japanese investors have led the charge, spending A$22 million in 2003-4, while British and Chinese buyers (including those from Hong Kong) spent A$18 million.