The state government’s planned property tax increases risk wiping the state off the global investment map, warns Chris Mountford,
executive director of Property Council Queensland.Kevin Farmer
THE state government’s planned property tax increases, due to come into effect on July 1, risk wiping the state off the global investment map.
As the government begins work on the State Budget, the Property Council is ramping up efforts to highlight the hidden effects of the tax hikes.
These tax hikes will increase the cost of doing business, damage Queensland’s economic competitiveness and impact on every Queenslander.
With Queensland preparing to leverage the Commonwealth Games to attract new investment opportunities, these tax increases couldn’t come at a worse time.
Election campaign costings, released in the days prior to the November 2017 state election, revealed the government’s intention to introduce new land tax thresholds for aggregated land holdings with an unimproved value above $10 million.
Individuals, companies and trusts who are within this new threshold will be subjected to a 25% increase in the rate of land tax from July 1.
The government has also committed to increasing the stamp duty surcharge on foreign buyers of residential property from 3% to 7%.
The end result of this decision will be higher business rents, higher costs for new homes and damage to Queensland’s reputation as an investment destination.
Businesses who lease premises from larger landlords can expect additional rental and occupancy costs.
New homebuyers can expect an additional $800-$1000 added to the cost of purchasing a new home.
We once were able to lure investment from interstate and overseas with attractive tax rates, but we now find ourselves uncompetitive with our southern neighbours.
The Property Council is calling for the government to abandon the tax increases and commit to review and modernise Queensland’s property tax framework.
Our current land tax thresholds haven’t been changed in a decade, leading to significant bracket creep as property values have increased dramatically.
We need a simpler, fairer and more attractive property tax system to unlock investment and create jobs.
An all-encompassing review of Queensland’s outdated thresholds and property tax rates needs to be undertaken to put Queensland back on the investment map.
Chris Mountford is executive director of Property Council Queensland.
Tim Gurner overcomes 2017 controversy to take third place in Young Rich List
IN 2017, property mogul Tim Gurner became one of the most hated men in Australia. But today, he’s having the last laugh.
LAST May, millionaire property developer Tim Gurner outraged millennials the world over after blaming their housing woes on smashed avocado and coffee.
The Melbourne man made the sensational comments during a 60 Minutes segment about housing affordability, telling the Nine network: “When I was buying my first home, I wasn’t buying smashed avocado for 19 bucks and four coffees at $4 each.”
Mr Gurner’s 2017 quote went viral, sparking hysterical headlines around the world and instantly turning Mr Gurner into a villain among young people struggling to break into the housing market.
But the 36-year-old’s comments have clearly done little to hold him back.
Last week, he was officially named as the third richest young person in Australia in the 2018 Financial Review Young Rich List thanks to his impressive $631 million fortune.
He was beaten only by Atlassian co-founders and serial rich-listers Scott Farquhar and Mike Cannon-Brookes, who took out the top two spots on the list for a record-breaking seventh year with a combined net worth of $14.2 billion.
The AFR also explained Mr Gurner had made a stack of cash by “targeting high-end buyers wanting to downsize”.
He got his start in property after taking over a lease on a suburban gym aged just 19, using $34,000 given to him by his grandfather.
A year later he sold the business and went into property development, riding Melbourne and Brisbane’s real estate boom.
At the peak of the smashed avo outrage, many of Mr Gurner’s detractors claimed he had enjoyed an unfair advantage from his grandfather’s cash.
But while the backlash has not affected Mr Gurner’s fortunes, he has previously spoken about the personal toll the scandal took.
At the time, Mr Gurner was ridiculed across social media and inundated with interview requests from local and international reporters alike.
In May this year, around a year on from the original controversy, Mr Gurner told Executive Style it had seriously impacted his life, and that his comments were taken out of context.
“I said it was really hard for them (millennials), I said I feel for them because there were real challenges, but I added I thought there was an issue in society with the amount of conspicuous consumer spending with the millennial generation,” he told the publication.
“I said a large number of this generation needs to lease (the) latest BMW, take the European holiday, buy a 70-inch TV, the latest designer suit, the latest phone, eat smashed avocado and $4 coffees every weekend.
“They took out the last bit and it all went crazy.”
Mr Gurner also described falling ill three days after the story went global as a result of stress — but said he did not regret making the comments.
“It really got me personally. We can all have a tough media facade but I am a normal person inside and it really hurt. But I learned a lot,” he said.
“I learned the haters talk a lot louder than the likers. And I think it did, ultimately, create a really good conversation around affordability and what the next generation will do about it, because it is a legitimate problem.”
Meanwhile, Ori Allon, who built his $539 million wealth in technology and property, scored fourth place in the Young Rich list, while equal fifth and sixth went to fitness entrepreneur Kayla Itsines and her fiance Tobi Pearce.
Seventh place went to Owen Kerr, with $460 million to his name thanks to his stake in foreign exchange Brokerage Company Pepperstone.
Husband-and-wife duo Collis and Cyan Ta’eed, who founded online graphic marketplace Envato, are jointly worth $428 million, earning them the eighth and ninth places, while farming and finance capital investor Peter Greensill sits in 10th place with $412 million in the bank.
The Young Rich List, now in its 15th year, tracks the wealth of the richest self-made Aussies aged under 40.
The 100 rich-listers featured this year have a staggering combined wealth of $23.5 billion — a huge increase on $13.2 billion last year.
Brisbane house prices tipped to rise 11pc in three years: QBE
BRISBANE homeowners will be the envy of their southern counterparts over the next few years, with property price growth predicted to be the strongest in the country.
BRISBANE homeowners will be the envy of their southern counterparts over the next few years, with property price growth predicted to be the strongest in the country after Adelaide.
House prices in the Queensland capital are forecast to rise by 11.3 per cent in the next three years, according to the latest BIS Economics Australian Housing Outlook commissioned by QBE Insurance.
Brisbane’s median house price is tipped to grow to $615,000 by June 2021.
But the outlook is less rosy for Brisbane apartment owners, with unit prices set to fall by 5.1 per cent over the next three years as the oversupply of stock continues to be absorbed and demand from investors weakens.
The median price for an apartment in Brisbane is expected to fall to $405,000 — the greatest forecast decline out of all capital cities.
Greater competition for inner-city apartments is tipped to cause investors to lower rents to try to draw tenants from more affordable city fringe locations.
Competitive unit rents and prices due to the oversupply may encourage some potential first home buyers to remain as renters, or alternatively preference an apartment purchase over a house.
But Queensland’s increasing population growth is expected to support buyer demand.
The report is the only one of its kind in Australia that looks at what house prices will do over the next three years.
‘Perfect storm’ to collapse capital city house prices by 20%
AMP Capital has revised its forecasts for the Australian property market downwards as a perfect storm of factors turns the property boom to a “bust”.
The wealth manager had previously predicted top-to-bottom price falls of 15 per cent in Sydney and Melbourne spread out to 2020, or about 5 per cent per year.
In a client note on Thursday, AMP Capital chief economist Dr Shane Oliver said that was now likely to be 20 per cent as “credit conditions tighten, supply rises and a negative feedback loop from falling prices risks developing”.
That would take average prices back to early 2015 levels. Dr Oliver maintained that a “crash”, defined as 20 per cent plus fall in national average prices, was unlikely – but his revised forecast points to near-crash territory.
“The risks are starting to skew to the downside – particularly around tighter credit and falling capital growth expectations made worse by fears of a change in tax arrangements,” he said. “Auction clearances in recent weeks have been running around levels roughly consistent with 7-8 per cent per annum price declines.”
CoreLogic figures show national house prices fell for the 12th consecutive month in September, with Sydney and Melbourne now 6.2 per cent and 4.4 per cent down from their respective peaks in July and November 2017.
Dr Oliver said the tide started to turn about a year ago due to a number of factors including poor affordability reducing the pool of buyers, tightened bank lending standards under pressure from regulators, and a “significant pool” of interest-only borrowers scheduled to switch to principal and interest in the next few years.
Adding to that was banks withdrawing from lending to self-managed super funds, reducing the pool of property investors, and a sharp fall in foreign buyers due to Australian government crackdowns.
Chinese investment in Australian property has fallen by 70 per cent since 2015.
Meanwhile there is rising unit supply, out-of-cycle mortgage rate increases, expectations of changes to tax concessions if Labor wins the next election, and falling price growth expectations creating FONGO, or “fear of not getting out”.
“On their own some of these are not significant, but together they risk creating a perfect storm for the property market,” he said.
Dr Oliver said a crash would require “much higher interest rates or unemployment, neither of which are expected, or a continuation of the recent high construction rates, which is unlikely as approvals are falling, and a collapse in immigration”.
“Strong population growth is continuing to drive strong underlying demand for housing,” he said, adding that while mortgage stress was a risk, “it tends to be overstated”.
“There has been a sharp reduction in interest only loans already, debt servicing payments as a share of income have actually fallen slightly over the last decade, a significant number of households are ahead on their repayments, and banks’ non-performing loans remain low,” he said.
“However, the risk of a crash cannot be ignored given the danger that banks may overreact and become too tight and that investors decide to exit in the face of falling returns, low yields and possible changes to negative gearing and capital gains tax.”
Even without a crash, the property downturn will affect the broader economy “via slowing dwelling construction, negative wealth effects on consumer spending, less demand for household goods and via the banks as credit growth slows and if mortgage defaults rise”.
“This will provide an offset to strong growth in infrastructure spending and solid growth in business investment and will constrain economic growth to around 2.5-3 per cent which in turn will keep wages growth and inflation low,” he said.
AMP’s housing market forecast is the most bearish of the major financial institutions. Morgan Stanley last week said it was expecting 15 per cent falls, “which would mark the largest decline since the early 1980s”, while ANZ and Macquarie have predicted falls of 10 per cent.
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