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New research has found that Queensland’s failed land tax reform caused “serious, long-term damage to the state’s stock of rental properties”.
MCG Quantity Surveyors managing director Mike Mortlock said analysis of data for over 1300 clients showed that investors had “fled the market in droves” after the state government announced on June 24 last year that land tax would be calculated on a property owner’s entire Australian portfolio, not just property held in Queensland.
The controversial proposal was ultimately shelved in September last year after pushback from other states who refused to supply data to Queensland to implement the tax.
But the damage was already done, according to Mr Mortlock.
“We conducted a state-by-state study of our client’s national investment property transactions to determine where investors were buying prior, during and after the Queensland government’s ill-fated changes to land tax were announced last year,” he said.
“While some may believe that no damage was done during that 98-day period (from announcement to axing) when the changes were a reality, our research shows otherwise.
“The outcome should have every renter fuming at the government.”
The MCG analysis looked at Queensland investment property purchases as a percentage of all Australian sales contracted prior to, during and after those 98 days.
“Prior to the changes, Queensland was the nation’s top destination for investors with 40.9 per cent of all investment transactions among our investor cohort – a proportion that had been rising throughout the pandemic,” Mr Mortlock said.
“As soon as the changes were confirmed, that figure dropped to 33.6 per cent of transactions, which is a 7.3 basis point fall or a drop of 17.8 per cent on the pre-legislation proportion.
“Despite the tax being repealed a short time later, the rot had set in according to our analysis.”
And the analysis suggests that even though the proposed changes were shelved, investors remained dubious about putting their money into the Sunshine State, with Queensland only bouncing back to hit 34.73 per cent of all investment property transactions.
The research found that Queensland’s loss was Western Australia’s gain, according to MCG Quantity Surveyors.
“Land tax wasn’t the only change that might have been implemented,” Mr Mortlock said.
“There’s been calls – particularly from The Greens – to freeze rents and implement other laws that would penalise landlords as well.
“The government never said the land tax policy was repealed because it was a bad idea.
“They simply claimed that without help from other jurisdictions, it would be unworkable. “This says to landlords that the Queensland government still has an appetite to do something that will burden on investors – it just wasn’t going to be this land tax change.”
A survey of over 3700 property investors by the Real Estate Institute of Queensland (REIQ) recently revealed that more than 80 per cent were considering bailing on the Sunshine State due to recent and proposed tenancy law changes.
When asked for their primary reason for considering selling, many pointed to ongoing rental reforms, bad tenants, increasing holding costs and the stigma that all landlords were “greedy, wealthy people” as among some of their key gripes.
“The rules keep changing and the government is now trying to tell me what I can and can’t do with my asset,” one said.
Stage two of the proposed rental reforms includes making it easier for tenants to install modifications, make personalisation changes, balance privacy and access, improve the rental bond process and implement fairer fees and charges.
It follows stage one rental reforms which included ending without grounds evictions, increased protection for renters against rent increases or eviction if they enforce their rights, setting minimum housing standards, making it easier for renters to have pets and making it easier for renters experiencing domestic and family violence to end a tenancy with limited liability for end of lease costs.
In April, the state government also implemented new legislation limiting the amount of times a landlord can raise rent to once a year, which starts on July 1.
At the time, deputy premier Steven Miles said the majority of landlords did the right thing, but the new laws would protect renters from those who “aren’t operating fairly”.
The rental reforms are backed by Tenants Queensland, but several investors said they were already wearing heavy costs.
“We have not increased rents on our properties to keep up with all the increases in interest, maintenance etc, as we are trying to keep current, settled tenants, but these changes are making our finances dwindle to such an extent that we are considering selling our properties,” one investor said in the REIQ survey.
The survey contained 15 questions and attracted more than 18,000 written comments from respondents, with many of those responses revealed in a recent news story.
Mr Mortlock said there were several reasons investors were able to quickly exit the market.
“Our research shows investors are embracing long-distance investing – so they’ll happily invest elsewhere when legislative changes are piled against them,” he said.
“Our figures reveal the average distance between where people live and where they buy an investment was 857 kilometres for the year to February 2023.
“This is up from 559 kilometres in the year to November 2021 and 294 kilometres in the pre-pandemic period to January 2020.
“The data shows investors have become highly mobile and more discerning about where they buy. If one jurisdiction takes an anti-investor stance, they will simply choose to put their money elsewhere.”
Mr Mortlock said “anti-landlord/pro-tenant/high-tax legislation” would likely only lead to less investors in Queensland.
He said the “blame falls squarely at the feet of the Queensland government”.
“Anyone who believes that there’s no long-term damage caused by announcing poor policy to gauge the voting public’s response needs to rethink their position,” he said.
“An ongoing campaign – including threats of higher taxes, more restrictive anti-landlord legislation and even rent freezes – are decimating housing supply and amplifying homelessness.
“This sort of ‘policy on the run’ has done irreparable damage to the state’s rental supply, with tenants hurt most by their actions.”
Mr Mortlock said that if policymakers did not engage with landlords to find mutually beneficial solutions to the housing crisis, the rental crisis would just continue.
The latest PropTrack Rental Vacancy report revealed vacancy rates remained steady in May but remains half the level seen before the pandemic.
Since March 2020, Brisbane’s rental vacancy rate is down 50 per cent, while in regional Queensland it remains 43 per cent below pre-pandemic levels.
According to SQM Research, Brisbane’s vacancy rate dipped to 1 per cent in May, down from 2.9 per cent in April 2020.
In April, the REIQ said Queensland was “worlds away from a healthy rental market and a grossly insufficient level of housing supply is squarely to blame”.
“Investors are tired of the constantly shifting goalposts,” Mr Mortlock said.
“Ongoing legislative changes mean they can’t invest with confidence or certainty in Queensland, so they’re looking elsewhere.
“Can you blame them?”
Originally Published: Samatha Healy | Weekly Times Now | 20 June 2023