This report explores the opinions of those in the industry about the impact that property taxes have on the decisions of homeowners, property developers and investors.
While there were no surprises with the overall unpopularity of property taxes, what was evident from our conversations were the shared views around the impact on the wider economy and exploring what alternatives would be palatable to the industry
if real tax reform was on the table.
A snapshot of our key findings is listed below:
- Levies, duty, charges and contributions – are they taxes?
Across the states we found little consistency in what was categorised as a property tax. It seems the different names applied to government charges in their various forms are creating the desired confusion around what is a tax, despite the State Governments themselves categorising them as such.
- Property taxes distort home owner decisions
While the decisions around the purchase of a home were acknowledged as highly emotive, almost 75% of respondents agreed that property taxes had a significant impact on the decision making of home owners in terms of selling or buying. Many believed that Stamp Duty swayed home owners to renovate rather than sell and also hindered employment relocation decisions.
- Housing affordability
Over 80% of respondents agreed that property taxes had a significant impact on housing affordability. While the blame is widespread when it comes to affordability, the level of property taxes imposed on housing is a commonly identified culprit. Housing affordability will only be improved if all levels of government commit to addressing this issue.
- Investor decisions impacted
Almost all respondents (91.8%), agreed that property taxes need to be considered when making investment/project decisions and 80.33% stated that property taxes had a significant influence on how their transactions are structured. Sadly, 45.9% of respondents had considered not proceeding with a transaction, due to the additional costs of property taxes.
- GST over Stamp Duty
The most popular alternative to maintain state revenue if Stamp Duty was abolished, was an increase in the rate of GST or broadening the base it applies to. Also popular was the broadening of the Land Tax base through removal of exemptions.
- The year ahead
The top five challenges identified for the industry this year were: regulatory framework, land supply, affordability, financing and consumer confidence levels. While the majority of respondents had positive performance expectations this year, many predicted stability. The residential property sector was the clear stand out for performance expectations and opportunity.
Sian Sinclair, Global and National Head of Real Estate & Construction, T +61 7 3222 0330