State's controversial land tax plan is spurring investors to dump their properties, survey finds
Nearly one in five landlords across Australia are planning to sell at least one of their properties in the next year – with many doing so to avoid Queensland’s controversial new land tax law, according to a new survey by Property Investment Professionals of Australia (PIPA).
If investors follow through on their intention to sell, this could potentially reduce rental supply by 200,000 properties at a time when vacancy rates are already below 1%, according to a report by The Australian Financial Review.
More than one in three investors planning to sell cited Queensland’s new land tax rule as the top reason for getting out of the market. The new tax law, set to take effect in June next year, allows the government to use the total value of an investor’s land holdings – including holdings outside of Queensland – to calculate land tax.
The new rule will drop tens of thousands of dollars in new tax bills onto the shoulders of interstate landlords and Queenslanders if they own even one rental property in the state and a holiday home elsewhere in Australia, AFR reported. The plan has drawn broad condemnation from the property industry and has even been slammed by government officials in other states.
About three in 10 investors thinking of selling would do so because changing tenancy laws have made it too expensive or too difficult to hold an investment property, according to the PIPA survey. More than a quarter of investors surveyed worry about losing control of their asset because of new or potential legislation, and more than one in five are worried about state governments introducing rental freezes.
Nicola McDougall, PIPA chair, told AFR that an investor sell-off could have serious impacts.
“If the percentage of investors who are considering selling winds up doing so, then we are going to see even higher rents, as well as a sharp increase in homelessness – especially in Queensland,” McDougall said.
The investor exodus has actually already begun, AFR reported. More than one in six landlords have dumped one or more properties in the past 12 to 24 months. Of those who sold, 45.1% have gotten rid of at least one investment property in Queensland, potentially eliminating 162,239 rental properties in the state – a reduction of 30% of available rental homes in just two years.
“From Coolangatta to Cairns, investors have deserted the Queensland market over the past two years, with more rental pain on the horizon as well,” McDougall told AFR. “We had an inkling that investors had been selling their holdings over the past year or two, but these results show that even we had underestimated the volume of rental properties that have been jettisoned from the market. The fact that 45.1% of investors sold at least one property in Queensland is mind-blowing – especially since this was mostly a period when the ridiculous new land tax wasn’t even law.”
Only one in three investors said Queensland was the best place to invest, according to the survey. That’s a significant tumble from a year ago, when 58% pegged Queensland as the best place to invest. The number of investors who see Brisbane as the state capital with the best investment prospects also tumbled from 54% to 35%.
“It is clear that investors are sick and tired of being treated appallingly by policymakers who continually believe that they are an endless supply of revenue for their coffers,” McDougall said. “It was clear that investors have had enough of being the cash cow for all levels of governments.”
Pete Wargent, co-founder of buyers’ agency portal BuyersBuyers, told AFR that when Queensland’s new land tax rule takes effect, many landlords will be forced to either sell their properties or increase rents.
“The biggest pain of all will fall onto renters,” Wargent said. “Landlords can always choose to sell up and invest in another state or territory. Renters don’t have that luxury, and there will be a 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.”