Property investor groups say the new land tax has come as a shock to investors around the country who own at least one investment property in Queensland, and some are already selling up.
Real Estate Institute of Australia president Hayden Groves said the body was anecdotally hearing of investors’ disquiet and his Fremantle agency has already been selling on behalf of investors.
“An investor has instructed us to sell a rental property, because of his exposure. He resides in Queensland and has taxable assets in Queensland as well. As a result of that he has instructed us to sell his property,” Groves said.
“If you owned one property that was taxable in Queensland and you had another portfolio in Australia, well, I know what I would do. I would simply sell that asset in Queensland and that’s really bad news for renters,” he said.
Groves said the land tax has far-reaching implications and would deter property investment if other state governments decided to do the same as Queensland.
“As soon as you put more tax in the system then investors will look for more tax effective and less punitively taxed investments to put their money [into], they’ll put it into a business or a trust account that attracts a better yield,” he said.
“We think this would throw the balance out, it would throw the balance out from property investment and ultimately, it will be tenants who will be the losers from the Queensland government land tax.”
Property Investors Council of Australia chair Ben Kingsley said investors are in “shock” that a state government has changed its position on land tax that applies to retrospective purchases.
“Their second reaction is that it’s a tax grab. They’re quite frustrated and annoyed by the government for doing this. They’re thinking of selling their property in Queensland.”
He said investors were either selling out or passing the cost onto tenants because investors were facing higher costs of holding their property.
But The Australia Institute senior economist Matt Grudnoff said creating less favourable conditions for property investors is the aim of such a tax.
“At the moment in Australia we give enormous tax concessions to people who invest in property,” Grudnoff said.
“This has left a distortion in the property market, which has led to overinvestment and higher prices.
“If the state government taxes that and stops some of that distortion and brings it back to some sort of level playing field between owner-occupiers and investors then it’s only a good thing.”
He said investors cannot pass on their entire land tax bill increase to renters because there is a limit on how much tenants can afford to pay, adding that investors’ decisions to sell their properties are likely to result in more homeowners as tenants get the opportunity to buy a home.
“If landlords are selling their property because they don’t want to be in the market any more, and they’re better off, and renters are buying those homes because they’re better off, this seems like a good situation.”