Home Insights Renters to Shoulder Burden of Queensland’s ‘Equitable’ New Land Tax

Renters to Shoulder Burden of Queensland’s ‘Equitable’ New Land Tax

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At first glance, Queensland’s new land tax for investors looks mundane. However, when we get into the details, it’s clear that renters are likely to lose out.

From 1 July 2023, the Queensland Government will transition to a new land tax calculation for investment property owners based on the total amount of land they own across Australia, rather than just the land they own in Queensland .

Possible immediate results are:

  • Rental prices rise as investors try to recoup their costs
  • Rental supply further declines as investors sell or hold back
  • Some investors may seek to maximize returns through the short-term rental market

Taxes aimed at leveling the playing field for local buyers are inadequate

Treasurer Cameron Dick explained that the new policy is a fairer method of taxation as it limits the number of times an investor can claim tax exemption.

True, but the fact that if other state governments followed this precedent, those making interstate investments would pay higher tax rates in each state based on the value of the land they owned in other states. remains.

It has been suggested that these changes are meant to level the playing field for locals competing with wealthy interstate property buyers.

But if the purpose is to prevent locals from being devalued from the market by cross-state buyers, this new law falls short.

A more realistic solution is to directly address this problem by increasing housing supply and providing assistance to local buyers.

Most importantly, Queensland and the rest of Australia are facing a severe shortage of rental housing. At the same time, increasing international migration and declining numbers of first-time homebuyers exacerbate the problem.

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Brisbane rental housing inventory is highly competitive and prices are rising. Photo: realestate.com.au


Queensland rental vacancy rates are at devastating post-pandemic lows

A new land tax is likely to discourage investment at a time when more rental housing is desperately needed.

Pricing for investors is a surefire way to exacerbate rental supply problems and drive up rental prices. So while local buyers may find some relief, local renters may face an even tougher situation.

Brisbane median rent rises

Average weekly rents in Brisbane have risen 11.8% over the past year, up 17.3% since the pandemic began.

The number of Brisbane rental properties listed on realestate.com.au is down 19.9% ​​from last year and down 40.4% from March 2020.

By comparison, nationwide rents have risen 9.3% over the past year, and are up 11.9% since the pandemic began.

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The number of apartments available for rent in Brisbane is over 40% lower than in March 2020. Photo: realestate.com.au


Queensland tenants in distressed areas

In rural Queensland, rents have risen by 11.9% over the past year and 20.5% since March 2020.

In rural Queensland, rental property has fallen 6.3% over the past year, 49.1% lower than at the start of the pandemic.

Queensland’s rental inventory decline has been far more dire than elsewhere, with the number of rental properties across the country down 13.7% over the past year and 27.1% since the outbreak of the pandemic.

Queensland tenants kicked out

For those looking to rent a property in Queensland, most parts of the state are virtually vacant and many properties are leased long before they become vacant.

The median number of rental days in Brisbane is 16 days, the lowest of any capital city in the country. Rural Queensland has 17 days for onsite rentals, the lowest of any other state market in the country.

Both Brisbane and rural Queensland have fewer days of on-site rentals than the nationally recorded 20 days.

Investors needed to increase supply

Investor withdrawal from the market will only exacerbate these tight market conditions.

Investor lending is already weak across the state, with the latest housing finance data showing Queensland investor lending of $1.7 billion in July 2022, the lowest since July 2021. It is the lowest level, 32.3% lower than the peak.

Furthermore, the share of new loans to investors in July 2022 was 32.6%, below the 10-year average of 35% and below the long-term average of 34.5%.

4 Solutions to Queensland’s Rental Market Problems

The numbers cast a gloomy shadow over the sunny state rental market, but there are solutions available to help solve the problem.

1. Increase supply

Increase the availability of affordable long-term rental properties.

2. Help first-time homebuyers

Different Ways of Support and Encouragement first home buyer Home ownership should be considered.

The scheme could instead include a transition to land tax for all buyers. stamp duty.

3. Help investors keep properties in the long-term rental market

Rental properties need to grow rapidly, and one way to do that is by encouraging real estate investment.

However, this requires conditions and governments to encourage investment in the real estate market instead of driving up investment costs.

It is not unreasonable for governments to seek new revenue due to extreme spending due to the COVID-19 pandemic.

However, we must consider possible unintended consequences of current housing market conditions.

4. Remove the barriers and complexities of accessing credit

Implementation of a new land tax aimed at investors will continue to curb real estate investment.

In recent years, we have seen lenders start charging investors an interest rate premium on mortgages. Banking regulator APRA implements macroprudential policies that restrict investors’ access to credit. State governments will raise taxes on investment properties.

As a result of these decisions, we are now seeing the cumulative effect of investment deterrence, leading to the tightest rental market on record.

Rent shortages and affordability challenges are expected to continue, especially if housing policies and tax systems fail to account for unintended consequences.

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