“It was so outrageous that we assumed it would never pass,” was one comment passed on to Antonia Mercorella, CEO of the Real Estate Institute of Queensland (REIQ).
“I think a number of us were scratching our heads wondering who came up with this particular reform because I think it’s really taking tax to a new level, and it is concerning,” she told The Epoch Times.
Mercorella is referring to the Queensland government’s recent decision to expand land tax liability—one of four new taxes introduced in the Australian state’s most recent budget in what is considered an attempt to arrest fast-rising debt and public service costs.
Land tax in Australia is normally paid by investors—above a certain threshold—on residential and commercial holdings to the relevant state or territory government.
In turn, average investors may look to diversify their portfolio and buy properties across the country in different jurisdictions—taking into account the differing thresholds—in an effort to reduce their tax burden.
However, in an Australian-first, the Queensland government will charge land tax based on the total value of an individual’s holdings nationwide—a move now being watched closely by other state governments.
Mercorella warned the implementation would not be easy and questioned the logic behind the move.
“What is land tax used for? How can you possibly justify basing the value of land tax on property that’s not within your borders? It just beggars belief—it actually is illogical,” she said.
A Bad Deal for Renters
However, Queensland Treasurer Cameron Dick has framed the new policy as one where the government is stopping investors from sidelining young families from entering the property market.
“Young families in places like Logan and Ipswich face unfair competition from Sydney-based speculators who are flipping properties around the country at a furious rate,” he said in a December 2021 statement. “We’ll close that loophole while ensuring there are no land tax changes for Queenslanders who own land wholly within our state.”
But, Mercorella believes this is an oversimplification of the matter.
“I think that’s way too simplistic an argument to say that if you took away investors that renters could afford to buy. I think that’s failing to recognise that there are people in our community who choose and would prefer to rent,” she said.
Currently, the majority of rental properties (36 percent of Queenslanders rent) are provided by regular mum and dad investors, while social housing—backed by the state government—only accounts for three percent of the supply.
Further, investors contribute significantly to government coffers, including higher stamp duty fees and land tax (state-level), council rates (council-level), and capital gains tax upon sale (federal).
“It’s the cumulative effect of these things that we’re concerned about, there’s more money that you’re forking out, in addition to mortgage repayments and other rates and bills associated with holding a property,” Mercorella said. “The reality is that the extra costs an owner incurs will inevitably be passed on to tenants.”
This will compound pressure on prospective renters who are already finding it tough to find a place to live.
The Greater Brisbane area—the capital of Queensland—recorded a vacancy rate of just 0.7 percent (as opposed to a healthy vacancy rate of 2.6 to 3.5 percent), a situation that has driven up rental prices across the city, according to the REIQ’s Residential Vacancy Report for June.
The situation was pushed into overdrive during the pandemic after lockdown policies triggered mass interstate migration away from the more populous states of New South Wales and Victoria, with Queensland being the major beneficiary receiving around 80,056 net migrants between 2020 to 2021. Around 44,705 came from New South Wales, and 23,299 came from Victoria, according to the Australian Bureau of Statistics.
The surge of interest saw many owners decide to sell their property, which had the following consequences: First, the emergence of a new pool of cashed-up renters who had just sold their property; second, another pool of existing renters forced to vacate their property because it had been sold; and last, pressure on current renters to pay more and match rising rental prices.
Lack of Detail Suggests Troubled Future Rollout
Recent Budget Estimates hearings suggest the state Labor government still has plenty of work to do before it can implement the tax.
Leon Allen, Queensland’s Deputy Under Treasurer, conceded that there were no existing arrangements with other jurisdictions regarding data sharing on what properties a person might own. Further, he added that the success of the policy would be “highly dependent” on how much information could be obtained—all states and territories run their own land registries independent of the other.
“It is reliant on us utilising available information as opposed to any direct feeds from other state revenue offices. Our estimations [on the revenue to be gained from the expanded land tax] are very tentative at this point,” he told the Committee on July 26.
Allen was also unable to respond immediately to questions on what effect the policy could have on the state’s housing affordability crisis and whether the parliamentary tax committee knew of the initiative.
The State Treasurer Dick said he believed the government would need to hire just nine employees to get the program underway, also noting that it would have access to “alternative mechanisms” and “third-party providers” to find out what properties an individual owns.
In response, Mercorella questioned whether it was actually financially worth doing.
“I would have thought that the cost of administering, policing, and enforcing this policy is likely to be greater than any actual financial gain.”
A Government Spending Beyond Its Means
The expanded land tax is one of four new taxes introduced in the latest Queensland budget, including a higher gaming tax, the higher payroll tax for large businesses (a “mental health levy”), hikes to the state’s mining royalties—the latter sparking a direct response from the Japanese ambassador. On top of this the government upped the penalties for speeding, seatbelt and red light traffic offences.
“This is what happens when government spends beyond its means, the people pay, and they pay, and they pay,” Campbell Newman, the former Liberal-National premier of Queensland, told The Epoch Times. “They’ve thrown caution to the wind, and they just don’t have any financial discipline.”
“The government has massively increased the administrative side of the public service and yet failed to deliver better frontline services. As a result, the costs have gone through the roof, and they’re desperate to raise cash. That’s why they are mugging everyday investors.”
Current debt levels are expected to reach $127.4 billion (US$87.8 billion) by 2024-25.
Premier Annastacia Palaszczuk has faced criticism for public service wage rises, as well as her government’s decision to spend $198.5 million on building and leasing a 1000-bed COVID-19 quarantine camp in Wellcamp—144 kilometres west of Brisbane—and shuttering it just six months after opening. Only 700 people stayed at the facility during that period.
State opposition leader David Crisafulli said the costs equated to around $325,000 per guest.
“The state government could’ve bought a one-bedroom unit for each guest,” he said.
Newman also said high coal and gas commodity prices had contributed to the budget’s bottom line, essentially masking the need for financial discipline. But at some point, the Queensland government would need to rein in spending—which could be challenging in the lead-up to the 2032 Olympic Games.
“Rather than take advantage of high coal and gas prices to get things under control, they just kept spending—when the commodity cycle turns, they will have huge problems,” he said.
“As the tranches of debt mature, they will need to be refinanced,” he added. “The interest rates have gone up substantially, and that means rather than dollars going into police, ambulances, and hospitals, they’re going to interest payments to overseas financiers.”
Home buyers on a budget can still snap up a property for under $250,000 in suburbs only a half-hour drive from Brisbane‘s city centre.
The Queensland capital has been Australia’s best performing capital city real estate market during the pandemic with house values surging by 27.4 per cent in the year to June.
The median house price of $892,133 would be beyond the reach of an average income earner wanting to pay off a home without being in mortgage stress.
Apartments in Brisbane typically cost $501,074, buying something near the city.
But there are still pockets in Logan, a satellite city a half-hour drive south-west of Brisbane’s city centre, where the mid-point price of a unit is at half that level.
This means buyers on a budget, wanting to also be closer to the Gold Coast, would be less affected by surging interest rates with borrowers already suffering the biggest Reserve Bank increases since 1994.
At Woodridge, 23km south-west of central Brisbane, the middle price for an apartment is just $229,170, CoreLogic data showed.
Home buyers on a budget can snap up a home for under $250,000 in suburbs only a short drive from Brisbane’s city centre. At Woodridge (apartment pictured), 23km south-west of central Brisbane, the middle price for an apartment is just $229,170, CoreLogic data showed
Real estate agent Selene Bruynzeels (pictured) there was an increase in interest from first-time buyers and investors in the suburbs of Waterford and Waterford West
Waterford West, 7km away from Woodridge, has a median apartment price of $249,863 while at Logan Central, it’s $233,144.
Suburbs where you can buy a $250,000 home
WOODRIDGE, QLD: Median apartment price of $229,170
LOGAN CENTRAL, QLD: Median apartment price of $233,144
WATERFORD WEST, QLD: Median apartment price of $249,863
GOODNA, QLD: Median apartment price of $250,006
KOORALBYN, QLD: Median Kooralbyn apartment price of $201,400
Logan real estate agent Selene Bruynzeels, from Ray White Beenleigh, said there had been increased interest from first-time buyers and investors in suburbs like Waterford and neighbouring Waterford West.
Couples and families liked the proximity to a Bunnings hardware and a local private school.
Ms Bruynzeels said the ‘awesome community’ offered first-time buyers a ‘great foot on the property ladder’.
A lower entry price meant a home could be rented out so the buyer could get a mortgage on a second property.
Ms Bruynzeels estimated properties in Waterford that cost $250,000 a year ago could now be sold for up to $350,000.
‘I wouldn’t be surprised if they didn’t increase significantly,’ she said.
In Ipswich, a little further south-west, the suburb of Goodna has a median unit price of $250,006.
Those wanting an even cheaper unit can head to Kooralbyn, an inland town in the Scenic Rim 100km south-west of Brisbane, where $201,400 is the mid-point price for an apartment.
Waterford West (pictured is a home on the market for $239,000) has a median apartment price of $249,863 while at Logan Central, it’s $233,144
House prices fall in most big cities in June
SYDNEY: Down 1.8 per cent to $1,382,631
MELBOURNE: Down 1.3 per cent to $975,850
BRISBANE: Flat at $892,133
ADELAIDE: Up 1.3 per cent to $699,251
PERTH: Up 0.4 per cent to $585,114
HOBART: Down 0.2 per cent to $796,863
DARWIN: Up 0.8 per cent to $588,928
CANBERRA: Up 0.3 per cent to $1,065,317
Source: CoreLogic data for median house prices in June 2022
The town’s median house price of $619,151 is also affordable for an average, full-time worker on a $90,917 salary.
With a 20 per cent deposit, they would avoid being in mortgage stress, where they owe the bank six times or more of what they earn.
Real estate agent Mel Weir, from Right Fit Properties, has lived in Kooralbyn for nearly a decade and noted her town was ‘finally being seen for what it is’ – a picturesque town nestled in the valley away from the bustle of city life.
Ms Weir estimated prices for homes had more than doubled in the last 12 months, and said there weren’t enough properties to meet the demand.
She said city workers were happy to drive up the Mount Lindesay Highway to the city and return to the peace and quiet of Kooralbyn.
CoreLogic noted that south-east Queensland’s Logan-Beaudesert region had Australia’s most affordable apartments, with median values under $250,000.
It’s a similar story in Adelaide where the median unit price at Salisbury, 25km north of the city, is just $263,951.
That is much cheaper than greater Adelaide’s median unit price of $423,708 and the city’s median house price of $699,251, following a 27.4 per cent annual increase.
Real estate agent Mel Weir, from Right Fit Properties, has lived in Kooralbyn for nearly a decade and noted her town was ‘finally being seen for what it is’ – a picturesque town nestled in the valley away from the bustle of city life
Those wanting an even cheaper unit can head to Kooralbyn, an inland town in the Scenic Rim 100km south of Brisbane, where $201,400 is the mid-point price for an apartment (pictured is a unit with an asking price of $249,000)
Adelaide and Brisbane are Australia’s strongest property markets.
But values are falling in Australia’s bigger capital cities, following 1.25 percentage points of Reserve Bank rate rises in May, June and July that have taken the cash rate to a three-year high of 1.35 per cent.
This has also seen borrowers suffer the steepest rate rises since 1994.
Sydney has so far been the worst affected big city with the median house price in the June quarter plunging by three per cent to $1,382,631, with values last month alone dropping by 1.8 per cent, CoreLogic data showed.
Melbourne’s mid-point house price fell by 2.4 per cent over three months to $975,850, losing 1.3 per cent in June.
Brisbane house prices were flat last month.
But separate data from PropTrack, the data company connected to realestate.com.au showed Brisbane house and unit prices slip by 0.09 per cent in June, marking the first monthly decline since April 2020 at the start of the pandemic.
The big four banks are expecting the Reserve Bank of Australia to raise interest rates by 0.5 percentage points in both August and September.
CoreLogic noted that south-east Queensland’s Logan-Beaudesert region had Australia’s most affordable apartments, with median values under $250,000 (pictured is a Woodridge home)
But ANZ is expecting the RBA cash rate to hit a 10-year high of 3.35 per cent by November, with half a percentage point rate rises in August, September, October and on Melbourne Cup Day.
The Commonwealth Bank, Australia’s biggest home lender, is expecting Sydney and Melbourne house prices to fall by 18 per cent by 2023.
Brisbane prices were tipped to rise by six per cent in 2022 but fall by 10 per cent in 2023 for a smaller net loss of four per cent.
Similarly, Adelaide was tipped to see a six per cent rise this year followed by an 11 per cent decline next year for a net loss of five per cent.
The Gold Coast’s record run of apartment sales has cooled with numbers for the first three months of the year falling to pre-Covid levels.
A report compiled by property consultancy Urbis shows the Gold Coast recorded 377 new apartment sales in the March quarter, about 38 per cent down on the previous three months and about half that of the same time last year.
The result also falls short of last year’s low of 450 sales for the June quarter.
“Sales have certainly eased off their 2021 highs in the latest quarter but that’s not unexpected considering the high levels achieved last year,” said Urbis director Lynda Campbell.
“But remember last year was exceptional,” Campbell said, pointing to three record quarters.
She said the data continued to highlight ongoing shortages of new apartments, with just 411 units still for sale at the end of March. That’s the lowest number since Urbis began monitoring the new apartment market in 2014. And despite 11 new projects being launched during the quarter.
“Last year was very different,” she said. “There were a lot of owner-occupied apartments, large floor plans on expensive apartments and a lot of interest from interstate buyers. Queensland was seen as a bit of a haven from Covid.”
Based on the current quarterly sales rate, the Gold Coast has just 3.3 months of supply remaining.
“The key statistic this quarter is the drop in the number of apartments for sale to a record low, which shows the supply side is still failing to keep up with demand.”
Most of those 411 apartments unsold at the end of March are in just three areas of the Gold Coast Central precinct—Southport, Surfers Paradise, and Broadbeach.
Campbell said they would be looking closely at four big projects due to launch on the Gold Coast, which would indicate what the remainder of the year might look like.
▲ While the city’s apartment market has eased, observers remain bullish.
Iris Capital has been given approval for the $800-million Victoria and Albert apartment tower at Broadbeach. Meanwhile, Melbourne-based Gurner Group’s La Pelago mega-project will include four towers across 11,000sq m at Ferny Avenue, Surfers Paradise. The $1.75 billion project will house more than 900 residences and about 200 hotel suites up to 60 levels.
Another Melbourne-based developer, Central Equity, has reportedly begun early sales at Pacific One, a 359-apartment tower, also in Surfers Paradise. And SPG Land has been given approval in the same area for Paradiso Place with 792 apartments.
“These are likely to alleviate the supply problem, although they are very different projects,” Campbell said. “They are all large-scale and resort-style. We’ll be watching these sales closely as the market digests rising interest rates and any new initiatives at the federal level.”
She said construction costs and supply-chain issues meant it was possible not as many projects would make it out of the ground. And volatile weather in NSW and Queensland had put a dampener on construction activity over the first quarter.
“But at the same time there has been record low unemployment and record low supply levels.”
However, observers remain bullish. Prior to 2021, the Gold Coast market absorbed an average of 1,100 new apartments a year with a high of 1,600 in 2015 and a low of 800 in 2017. If the March-quarter sales of 377 are repeated throughout the year, 2022 could become the third biggest year for sales behind 2015.
“The dominant buyer profile for Gold Coast apartments remains owner-occupiers looking for larger apartments,” Campbell said. “While supply dropped, the price increased. Almost a third of the sales—about 31 per cent—were at price points above $1 million, which reflects the general increase in apartment values.”