The South Australian government is considering radically changing land tax in SA – this could including the complete abolition of stamp duty in favour of land tax being charged to all properties, estimated at $1200 per annum for a median property.
Only in the consulatation phase at this time, however this could have some major game changers for SA, including the ability to flip properties at minimal costs, near on halving of minimum deposits requirements for lending etc.
What’s everyones thoughts on this? As a broker I see a lot of people’s financial situations – my thought is that this will rapidly open up the ability for people to aim at higher priced properties, or enter the market earlier, which in turn can push along capital values in Adelaide in particular.
Interesting times indeed.
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This topic was modified 9 years, 9 months ago by
Corey Batt.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
Wow this will be interesting.
I’d rather have an ongoing cost than an upfront one as stamp duty is expensive and restricts buying. This will allow me (and other investors there, not to mention cash-stricken first home buyers) to purchase more often thereby lifting Adelaide metropolitan prices up to match other Australian capitals.I’m so glad I have a few cashflow positive properties Adelaide to take full advantage of the uplift :)
D.T. | DT Property Management
http://www.dtproperty.com.au
Email Me | Phone MeAdelaide Property Management - whole Adelaide metro
That sound’s interesting. My view is that the more the government can wind back on taxes and charges the less it’s stealing from it’s citizens! I hope they do it. But if you remove artificial barriers to market entry then there will probably be a spike in home values which will eventually cancel out those stamp duty savings anyway. Better to have the money go to the people than the bureaucrats though :) MT
The reality is it makes it cheaper up front to get into the market, but over the long term you’d pay more in the annual land tax than you would have in stamp duty.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
The reality is it makes it cheaper up front to get into the market, but over the long term you’d pay more in the annual land tax than you would have in stamp duty.
Really dependent on the frequency of property changeovers. SA has extortionate stamp duty charges, so a 600k property would take 22 years for the stamp duty to be cheaper than the proposed land tax charges. When you consider that the frequency of buying/selling/upgrading/downgrading, a lot of people can actually be better off.
Individuals at the lower end of the market buying one property for life will be paying more long term of course.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
Its interesting to see this happening in South Australia.
When I worked as a Sales Representative in Melbourne, the interesting thing was seeing the number of people who were basically seeking the value of their place PLUS THE STAMP DUTY AMOUNT as the price they would be trying to settle for.
So in Victoria at least .. the minimal increment of anything up to 5.5% leads to at least a 4% movement in house prices (because vendors usually end up settling for a little less)
So what happens when you remove this regular increment even though its painful?
Thats the overall question .. and I think it would be interesting to see whether it has any real effect on that minimal visible increment that exists BECAUSE of the stamp duty.
And does a straight across the board tax really equal the same thing? I would think it would be more of a longer term direct taxation burden and actually LESS incentive for the investor .. and that would NOT be a good thing for South Australia.
The other thing about reaching out to achieve ever higher levels of borrowing is it NEGATES the key factors that keep the value of the property market. Longer term trades .. higher degrees of land holding and a realistic pricing versus comparatives. You’ll have people releasing property due to the inability to afford the land taxes rather than holding for extended periods.
But who knows? A market adjusts to volatile conditions on a regular basis. If we were still dealing with the 1950s Victorian regulations with housing, no-one would be making money on property and nobody would be selling it. Having had details of it relayed to me by my father its a wonder ANYONE was investing.
Note: if you want to see how bad it was, go to St Kilda (vic) and look for the older style apartments that are unchanged. You’ll find a sudden burst in Apartment Building in the early 60s as the laws changed and people could make money on the places. You’ll also find that this was the chief reason for the stagnation in the area as the existing property conditions of the 1950s turned reasonable properties into carved up slums to maximise returns and make the properties viable.
The other thing about reaching out to achieve ever higher levels of borrowing is it NEGATES the key factors that keep the value of the property market. Longer term trades .. higher degrees of land holding and a realistic pricing versus comparatives. You’ll have people releasing property due to the inability to afford the land taxes rather than holding for extended periods.
Interesting. From an investors point of view won’t that ongoing cost just be passed down the line to tenants (creeping up to $25/wk)? And wont the easier entry to the market boost the price in the same way it does when restrictions to credit are eased? I’m not saying I’m right but I would be interested to know your thoughts on that aspect. MT
There may be a passing on of costs to a degree, or absorbed into the bottom line – it largely depends on the supply/demand equation as always.
I do believe this policy would certainly place strong upward pressure onto prices as credit availability would balloon, especially for FHBers.
I honestly doubt $1200 will created a noticeable increase in financial pressure on the owner occupier market to create increased supply, as that figure is the same as a 0.5% rate increase on the average mortgage size.
I imagine if this reaches the point of legislation there will be significant lobbying from pensioner interests.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
I agree Corey that the $1200 figure proposed wont do much increase in financial pressure. But as with most govt taxation schemes .. the first time its handed out its nice and small .. and when things get bad .. oh .. lets raise that tax …..
And to the idea of the costs being absorbed into a rental increase .. just remember regardless of the perception .. its still a market out there for rental .. you can only plough the tenant so much before other cities / areas end up looking more attractive. And to boost rental in a city where its not easy at the moment to keep both business and residential clients would be tantamount to economic suicide.
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This topic was modified 9 years, 9 months ago by
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