Calls to repeal new tax
The state of Queensland needs to repeal its land tax before the rental market is plunged into a deep state of crisis, according to Pete Wargent, co-founder of Australia's first national network of buyer's agents, BuyersBuyers.
Mr Wargent said, "when the new land tax rules come into effect next year, many commercial and residential landlords will be forced to either increase rents or sell their properties, exacerbating an already chronic shortage of rental properties, particularly in the south-east corner of the state."
"The new tax legislation is both illogical and very unusual, and this unprecedented legislative reform runs contrary to the usual principles of taxation, penalising investors who own properties in other jurisdictions unnecessarily."
"The problem with such a double tax 'grab' is that although in the first instance it appears to raise funding for infrastructure in Queensland, there will inevitably be unintended consequences, which hurt not only landowners and landlords, but in turn also companies and small businesses."
"And the biggest pain of all will fall onto renters. After all, landlords can always choose to sell up and invest in another state or territory. Renters don't have that luxury, and there will be catastrophic shortage of available rentals if Queensland experiences a net decline in the number of landlords in the current market conditions. Rents will skyrocket, both for commercial and residential leases" Mr Wargent said.
Population surge
BuyersBuyers CEO Doron Peleg said that Queensland was in the unusual situation of having not experienced a significant decline in its population growth through the pandemic.
Mr Peleg said, "while Sydney and Melbourne saw population growth slowing to a relative crawl, south-east Queensland benefited from a record high surge of interstate migration to the Sunshine State."
Figure 1 – Net interstate migration
"In particular, the Sunshine Coast, Greater Brisbane, and the Gold Coast have all been tremendous beneficiaries of the increase in flexible and remote working arrangements, with interstate migrants attracted by the combination of relative affordability, climate, and lifestyle."
"Queensland's population actually increased by a very strong 73,700 or 1.4 per cent in 2021, despite the closed international borders".
"Unfortunately as the borders now reopen such a policy to reduce the number of rental properties available is going to result in a rental market meltdown, with disastrous consequences for young families and other renters" Mr Peleg said.
Forced rental sales
BuyersBuyers co-founder Pete Wargent said that some of the firm's clients had already advised that they plan to sell properties in Queensland next year when the proposed land tax comes into play.
Mr Wargent said, "in some cases investors own just a single rental unit in Queensland, but because of the extraordinary way in which the land tax is set to be levied they face enormous increases in taxation due to owning property in the southern states."
"The Queensland government provides an example of an investor owning one property in Queensland with a taxable land value of $745,000, and taxable land value interstate of $1,565,000, and in this instance the land tax increases by more than 330 per cent from $1,950 to $8,422. And bear in mind that this is a single cherry-picked example – in reality for many landlords currently under the land tax thresholds will suddenly be slugged with very large tax bills, leaving them no option but to sell."
"It's not entirely clear how the state of Queensland plans to enforce the tax given the lack of access to the records of other states, but in this instance they will have no realistic choice but to sell."
"Unfortunately, going forward there will be fewer new investors in the state too, because the prospect of paying more tax than in other states makes Queensland a relatively less attractive proposition."
"Historically, Census data has shown that Queensland is consistently the only state in Australia with a high proportion of the rental stock owned by residents of other states, but this balance will now inevitably shift unless there is a change in thinking."
"Realistically the state needs a rethink and must repeal the new land tax before the rental crisis becomes an absolute fiasco." Mr Wargent said.
