Issue 18 | Thursday 8 September 2022 | Illogical Government Decision
Hi Andrew Bell with you, and today I want to share something with you that to me is a classic example of how poorly governments can coordinate within themselves and as a result how ineffective they are.
We all know there is an acute rental housing shortage. It is getting worse, not better. One of the most fundamental responsibilities of a government is to be able to ensure that the essentials of life are available to those that they are elected to look after. Housing is one of those most basic needs.
Approximately a third of Australians are renters and that proportion is growing, not diminishing. Housing need is either provided by the government through housing public housing or through private individual investors. Governments around Australia are cash-strapped and have not committed significant monies to public housing, and therefore around 90% of rental accommodation must be provided by private investors.
It’s acutely apparent that governments have no appetite to build public housing and so there is almost total dependence on private investors to buy properties as investments to provide rental accommodation to tenants.
So, right now when so much more rental accommodation is required state governments should be incentivising people to buy investment properties. I publicly voiced that a special incentive program should be put in place in the areas where the greatest need is. What state governments should do is reduce stamp duty on the purchase on the basis that properties are in the rental pool for 3-5 years. They could also reduce Land Tax for that same period of time. At a federal government level there could be tax incentives put in place to attract people away from other forms of investments like shares, crypto or fixed rate deposits and encourage them to buy rental properties. I would even suggest that you target the areas that are in most need where those incentives I mentioned, might be for example in a suburb like Southport where there is a huge demand for rental as opposed to other areas where demand is not great.
Here we are with a critical need for more rental accommodation yet listen to this. This is what the Queensland government has done. They have just announced an increase in Land Tax by not only taxing properties in the state of Queensland, as they have for all time, but they are now going to include in their assessments any properties you own anywhere else in Australia. This means that your threshold for eligibility for tax is diminished, and you will be paying more Land Tax. For people who have investments in other states it means if you are an investor in Queensland, you will pay tax because of your investment in other states. The logical thing for any investor is to simply sell some of their rental accommodations and concentrate it all in one state. It will be a huge disincentive for anyone to buy because other forms of investments aren’t taxed. It’s inevitable that that tax will be passed on to tenants in the form of high rents.
Not only that, but there is now new legislation that has gone through Parliament that has again weakened landlords’ rights and strengthened tenants’ rights, and most landlords believe that it’s an unfair imbalance of rights. Personally, I am not as concerned about that as with good property management the new legislation can be managed. For many landlords that either self-manage or have a managing agent that is not skilful then it’s going to be a significant impost.
I just can’t picture how this came about. I would have imagined there was a Cabinet discussion at some stage in the last year or two talking about the housing crisis and what could be done at the government level to help this situation. Surely the Premiere asked the Minister for Housing what’s on the drawing board and what suggestions they can make to encourage more investors. Surely discussions would have been had with the Treasurer asking him what could be done to incentivise more investment purchases to help this crisis, yet the complete reverse has happened. Two decisions that have made buying rental investment properties far less attractive have gone through Parliament. Simply crazy and so disadvantaged as tenants at the worst possible time. I am certainly getting heavily vocal on this because it’s not too late to change what they are doing and defer these decisions if they really must make them and let the housing crisis pass through. It’s just simply bad government.
My greatest concern is that about 87% of all residential rental properties are owned by people who have just one rental property and may not be particularly experienced investors. For some of these people, the proposed changes put a higher level of uncertainty and concern, and it will result in a percentage not buying that investment property. For those who own a couple of properties, I have already encountered three people in the last week who have listed their property for sale just because they are furious with the Queensland government and have refused to pay the tax. The reality is for people who are a little bit more au fait with how the world works will simply manage the new legislation efficiently and sadly the increased Land Tax will be passed onto tenants to pay. Here we are supposed to have a state government trying to help the situation rather than them being a hindrance.
We are only a week away from our Ray White Surfers Paradise Muscular Dystrophy Ball. We have got two tables available if anyone is keen to have a great night, and if you cannot pull a whole table together we can accommodate twos and fours or even singles, just reach out to us. Please visit rwspevents.com.au if you would like more information or to lock in tickets. Thank you very much to those who have reached out and made direct donations because they couldn’t be there on the night.
Rolling into spring and looking forward to the usually busy spring real estate market. Great to see activity has already picked up over the past two weeks. Enjoy the warmer weather.
Andrew Bell, OAM
Chief Executive Officer
The Ray White Surfers Paradise Group