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Why Queensland investors shouldn’t sell in protest
Queensland Investors

There is an issue in Queensland that is gathering more and more momentum in the media, because it has most of the people in the property investment profession scratching their heads in bewilderment.

In fact, I myself have spent plenty of time going: What the heck?

What I’m talking about is the new Queensland land tax, which was quietly, or should that be sneakily, passed in late June by the State Government.

The tax was first proposed late last year, but no one thought it would actually become a reality because it was so, well, ridiculous and potentially not legal at a constitutional level either.

In a nutshell, the law will see the Queensland Government using the total value of someone’s Australian real estate holdings across the nation to calculate land tax. Your principal place of residence generally will remain exempt. 

According to the government, this includes your taxable land in Queensland as well as your “relevant” interstate land.

In essence, this means that interstate investors of Queensland property may have to pay land tax for the first time, but may also be required to pay on properties located in other jurisdictions around the country.

Industry campaign

Industry bodies such as PIPA, the REIQ have been on the front foot arguing against this insane land tax at a time when there is a critical undersupply of rental properties – not only in Queensland but in other states and territories, too.

Weekly rents have been rising strongly over the past year, given there is a record low supply of properties available for tenants.

In fact, the national vacancy rate hit just 0.9 per cent recently, the lowest level in nearly two decades, according to SQM Research.

While the land tax is far from ideal for some investors, the market metrics for property investors remains overwhelmingly positive at present.

We are seeing an increase in properties available for sale, which means more choice for savvy investors, keen to make the most of the current market pause.

On top of more stock to choose from, the number of active buyers has fallen dramatically compared to this time last year.

In fact, according to the latest ABS Lending Indicators, the value of new borrower-accepted loan commitments fell more than 11 per cent for owner occupiers over the year to July, while the value of loans to investors dropped nearly 16 per cent over the same period. 

Real Estate Institute of Queensland CEO, Antonia Mercorella, has branded the tax change a “slap in the face” to the one sector which is propping up the state’s economy. She has said the government did not consult with relevant property stakeholder groups before making its announcement. They literally consulted no one to discuss and think through the fallout of this new tax.  Ms Mercorella pointed out that no other state or territory takes this approach on land tax and she is concerned it will deter people from investing in Queensland. I agree with her. 

It really highlights a complete misunderstanding of basic economics. This will deter some people from buying in Queensland and it will compel some investors who own in Queensland to sell their properties.

What are the implications for investors and renters?

If this takes hold, it will mean that the rental shortage in Queensland, which is already dire, will get even worse and rents will rise further. Brisbane’s current vacancy rate is 0.6% while many Queensland regional markets have vacancies below 0.5%, with international borders now open and interstate migrants moving to Queensland in large numbers. The land tax rules could create a situation where there are zero vacancies in locations across Queensland. In other words, no properties available for rent.

Currently, more than one-third of Queensland households rent, with over 90% of rental homes provided by investors. State government social housing accounts for just 3% of the state’s rental supply. People who need to rent will have nowhere to live and businesses trying to fill vacant job positions won’t be able to, because willing workers won’t be able to find anywhere to live in their area. This is already the case in some regional markets in Queensland.

Property Council Queensland Executive Director has labelled the new measure a tax grab. “Given the state is in the midst of a housing supply and affordability challenge and is unable to fill critical skilled positions across the labour market, Queensland needs all the people and investment it can get.

Hold your nerve

There is currently a growing sentiment amongst some investors who are indicating that they intend to sell their Queensland property or properties because of the new land tax.

However, I think such a drastic protest move is short-sighted for most, because it is still not clear how the policy will work in practice, given it seems that the government expects investors to self-report their interstate holdings…. good luck with that, I say!

Likewise, there is still a chance the tax will be delayed – or even repealed if the industry campaign is successful – because of its potential to further decimate the rental market across the Sunshine State.

But, if some investors do decide to sell up in protest, that will provide opportunities for others who are not fearful of the policy, and who recognise the potential long-term benefits of owning a slice or two of Sunshine State real estate.   

And don’t forget, generally, land tax incurred by owning income producing assets, is often tax deductible. Check with your accountants before you do anything drastic. 


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