The further increase in the ACT land tax will have a major impact on the rental market and a detrimental effect on landlords and tenants, according to the Real Estate Institute of ACT (REIACT).
The comment follows ACT treasurer Andrew Barr's rejection of the suggestion renters will end up more out of pocket on investment properties as of July 1, as reported by the Brisbane Times.
Mr Barr said rents were falling because of oversupply and the tax was not likely to have a large impact.
REIACT chief executive Ron Bell has a different opinion on the matter, claiming the rise in the land tax will definitely affect landlords and tenants.
“We have got plenty on the market that is vacant at the moment, but by putting the land tax up as much as they have, the landlord is definitely going to try and pass it on to the tenant and that is going to make their rent even more expensive,” he told Residential Property Manager.
“[Mr Barr] is right about rents falling and it is mainly because of an oversupply, but there is also so much uncertainty in our market… so it has the effect of people not doing anything at all rather than leaving home and renting properties,” he added.
Mr Bell said landlords wish to achieve capital growth, and there is virtually no capital growth at the moment.
“I think landlords will seriously think about selling their investments; there will be a certain number that do that, that is for sure,” he said.
“It will be negative to a point because when things start to get better here in Canberra, we are going to lose a lot of that available stock,” he added.
Mr Barr, however, said the market could absorb the change given the fall in rents by as much as 20 per cent over two or three years.
“I suspect the impact on the rental market will be negligible and, given what’s in the supply pipeline and the fact ultimately rents are an interaction of supply and demand, it’s highly likely rents will continue to fall in the territory in the short term,” he said.
Landlords could write off the cost in their tax returns, so in the end the Commonwealth would wear some of the cost, he also added.