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Failed QLD land tax has seen investors flee

The Queensland government’s failed attempt to introduce an expanded land tax has done long-term damage to the state’s rental property numbers, according to new analysis.

Managing director of MCG Quantity Surveyors, Mike Mortlock said his latest client data analysis showed that despite the tax changes ultimately being repealed, their announcement was enough to see investors flee the market in droves.

“We studied 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,” Mr Mortlock said.

“The outcome should have every renter fuming at the government.”

In June 2022, new legislation was announced that confirmed land tax figures in the following financial year would be calculated on a property owner’s entire Australian portfolio, not just property held in Queensland. 

The Queensland Government scrapped the planned changes only 98 days after it was first announced, following severe backlash.

“While some may believe that no damage was done during that 98-day period when the changes were a reality, our research shows otherwise,” Mr Mortlock said.

“The 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“Despite the tax being repealed a short time later, the rot had set in according to our analysis.” 

Mr Mortlock said after rescinding the legislation, Queensland only bounced back to 34.73 per cent of all investment property transactions.

“That’s a modest rebound in investor activity and is still a long way off the greater than 40 per cent result we saw prior to the announcement,” he said.

“Our analysis shows Western Australia was the big beneficiary of Queensland’s land tax legislation debacle. 

“Our numbers suggest the proportion of Aussie investors buying in WA almost doubled when the legislation changes were a reality – and they’ve only retreated slightly since the changes were shelved.”

Mr Mortlock said there are 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.”

He said investors are also disturbed by anti-investor law changes that are so readily implemented by governments. 

“As such, I expect jurisdictions like Queensland, which seem so ready to introduce anti-landlord/pro-tenant/high-tax legislation, to feel the sting of further reduced investor participation. 

“These regions should be looking to entice more investment, not discourage it through anti-investor rhetoric and ongoing restrictions that favour tenants over landlords.” 

Mr Mortlock 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. 

“The Queensland Council of Social Service (QCOSS) report released in March found the number of homeless people in Queensland had jumped more than 20 per cent in five years – almost triple the increase nationally.” 

Mr Mortlock said the Brisbane rental vacancy rate continues to hover around historic lows of about one per cent. 

“This sort of ‘policy on the run’ has done irreparable damage to the state’s rental supply, with tenants hurt most by their actions,” he said.

“Governments across all tiers need to engage with landlords to find mutually beneficial solutions to the housing crisis. 

“If they continue to pander only to special interest tenant groups who appear to have no understanding of the demand/supply equation, then I see no end in sight for this rental crisis.”

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Rowan Crosby

Rowan Crosby is a senior journalist at Elite Agent specialising in finance and real estate.