The Victorian property industry continues to buzz with activity and new government planning reviews; however recent data appears to indicate some slowing in the state. We also look at foreign investment tax implications and upcoming property law review
Victorian growth trends
Whilst the Victorian real estate and construction industry continues to buzz with activity, data released in early September by the Australian Bureau of Statistics appears to indicate some slowing in the state.
For example:
- Whilst Victoria’s GSP rose 0.9% for the June quarter (compared to 0.2% nationally), this followed a 1.7% increase in the March quarter that was largely off the back of commencement of new buildings and dwellings and continued work on existing projects. However, new dwellings fell 0.8% in the June quarter after two strong quarters
- The trend estimate for total number of dwelling units approved in Victoria fell 3.1% in July (compared to 0.7% nationally) and has fallen for five months, consistent with the national average
These trends are also reflected in annual growth rates, with Victoria’s at 3.0%, slightly behind that of NSW at 3.2%. Whilst at first blush it appears these two great states are on par, when you delve into the annual growth rates of the previous quarter - Victoria at 3.4% and NSW at 2.2% - it does highlight that the NSW Baird Government is very much leading a state on the go and that perhaps the Victorian Andrews Government needs to look for state-enhancing infrastructure projects to replace the now terminated ‘East-West Link’.
Planning news
In a sign that the Victorian Government’s Minister for Planning, Richard Wynne, has fully recovered from his health scare that followed soon after the Andrews Government came to power last November, there has been plenty of activity out of his ministerial department including:
- Legislation to deliver, from early 2016, a simpler, fairer development contributions system to provide for infrastructure, particularly in the state’s growth areas;
- Release of “Victoria in Future 2015” which is the official state government projection of population and households to 2051. Statistics that are likely to be relevant to developers include:
a Distribution of households by type:
i In 2011, families with children represented 43% of households but this is dropping to 40% in 2051;
ii One person households are increasing from 25% in 2011 to 28% by 2051; and
iii Couple only households are broadly staying the same at 26-27%.
b The top five local government areas that will experience the highest growth to 2031 are Wyndham, Casey, Whittlesea, Melton and Melbourne.
c Victoria’s population is expected to almost double between 2011 to 2051 from 5.5 to 10 million. Those aged over 65 in 2011 represented 14% of Victoria’s population but by 2051 will represent 22% - highlighting the need for good planning for the retirement and aged care sectors.
- The government in May 2015 released a discussion paper, Better Apartments, to kick-start a citywide conversation with the community and industry to shape apartment design guidelines. Better Apartments focuses on how spaces within an apartment can match peoples' needs and expectations during different phases of their lives. Survey responses and submissions on the Discussion Paper closed on 31 July 2015. We will keep you updated on the outcomes.
- The first comprehensive review of the Local Government Act in a quarter of a century has commenced, with the appointment of an advisory committee to provide independent advice to the Minister for Local Government on the reforms required. This is on the back of a review commenced by the Essential Services Commission earlier in the year into capping council rate increases. This particular review is still ongoing.
- Unexpected changes were announced in early September that are likely to significantly reduce the height of Melbourne CBD’s future towers to no more than 24 floors. Higher towers are permitted but a trade-off is that there needs to be more open space. This announcement may jeopardise plans by developers who have acquired land but have not yet had plans approved.
Taxation news
The headline grabbing story out of Victoria recently, is the introduction of the 3% Foreign Purchaser Additional Duty and the 0.5% Foreign Absentee Land Tax Surcharge. Its announcement by the Victorian Treasurer, Tim Pallas, without industry consultation, in May has not been reciprocated by other states. Whether this will have a long-term negative impact on Victoria’s property sector is yet to be seen but there have been anecdotal comments from developers that ‘they will take their business elsewhere’.
Whilst the legislation has been passed and exemption guidelines gazetted there remains a raft of outstanding matters that the Property Council’s Tax Reform Committee is working to get fixed with both the Treasurer and the State Revenue Office (SRO) who is charged with its administration. Key focus areas are:
- Ensuring that the surcharge does not apply to land that was acquired under a contract prior to the introduction of the new rules but where a foreign purchaser has been nominated after that date to complete the contract.
- Allowing major developers to obtain a permanent exemption from the surcharge if their initial exemption application is successful and their background facts and circumstances remain unchanged. Currently, foreign developers who want an exemption from the surcharge have to apply for each and every land purchase they make.
- The SRO’s requirement that the new purchaser statement form (Form 62) must be completed for all contracts, transactions, agreements and arrangements entered into on or after 1 July 2015. This is regardless of whether there is a foreign purchaser and irrespective of the type of property being acquired.
- Limiting the reach of the surcharge where Australian resident discretionary trusts acquire land. Based on the current interpretation of the new legislation, most discretionary trusts would be caught by the surcharge as they generally have a wide class of beneficiaries that is likely to include a foreign resident.
Property law review
The Andrews Government announced in August a sweeping review of outdated laws covering estate agents, land sales, conveyancing and owners corporations.
The comprehensive review will examine four key pieces of property legislation including the Sale of Land Act 1962, Estate Agents Act 1980, Conveyancers Act 2006 and Owners Corporations Act 2006.
The review will be conducted by Consumer Affairs Victoria and will focus on three broad areas:
- the sale of land and real estate transactions in Victoria
- the management, powers and functions of owners corporations
- licensed professionals who assist with the sale of land and real estate transactions, and professional owners corporations managers
This review was instigated on the back of the previous Liberal Government’s attempt to exempt certain commercial property transactions from requiring a real estate agent to be involved.
Next article: Western Australia Real estate & construction update
