Why The Controversial Queensland Land Tax Had To Go

Why The Controversial Queensland Land Tax Had To Go

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Over recent months, industry opposition to a new Queensland land tax law grew louder and louder with each passing day.

The law would have seen the total value of a Queensland investor’s portfolio around the nation used to calculate the land tax that needed to be paid to the state government – potentially adding thousands of dollars to their annual land tax bills.

Such a system had never seen the light of day before because other jurisdictions never considered taxing property in another state or territory fair and reasonable.

Industry campaign

The Real Estate Institute of Queensland (REIQ) was at the forefront of the industry campaign against the Queensland land tax, which had been proposed in December last year and quietly passed into law in June this year.

However, as soon as the potential financial impact on tenants and landlords across the country became apparent, more and more industry stakeholders produced an analysis of what the potential impact was likely to be on rental supply.

One of the most significant pieces of research was the 2022 Property Investment Professionals of Australia (PIPA) Annual Investor Sentiment Survey.

The eighth annual investor sentiment snapshot found that nearly 30 per cent of rental dwellings had been stripped from the Queensland market in two years as more than 160,000 investment properties were potentially sold to home buyers.

The survey also found that a staggering 45.1 per cent of investors had sold at least one property in the Sunshine State in the two years to August this year.

Further independent analysis of the data found that owner-occupiers bought nearly two-thirds (65 per cent) of all investment dwellings over the period, which means rental stock in Queensland has potentially fallen by an extraordinary 29% – or about 162,000 dwellings – in just two years.

And in a sign of more rental stress to come, 19 per cent of investors nationwide had signaled they intend to sell even more property over the year ahead, with the number one reason being that the new Queensland land tax law will penalise owners of property in other states/territories.

This research was released on Thursday, 22 September, and a mere eight days later, the Queensland Premier shelved the land tax policy.

Rental under supply

At the heart of the industry campaign against the land tax was the detrimental effect it was set to have on rental property markets when we are already struggling with record-low vacancy rates and rising interest rates.

In Brisbane, for example, the vacancy rate was just 0.7 per cent in September, according to SQM Research, with asking rents up nearly 24 per cent in the past year alone.

With these market metrics highlighting a rental market struggling with a critical under supply of properties available, the Queensland Government had very little choice but to shelve the much-derided policy.

As soon as it announced that the tax was no more, investors of Queensland real estate no doubt let out a massive sigh of relief. The decision also meant that investors again recognised the sound economic fundamentals of buying in our region.

Southeast Queensland remains a solid property investment location given our more affordable prices, strong yields, and a supercharged major infrastructure program.

If you would like to speak to an expert in the Queensland area, contact Adam Empringham