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Queensland’s controversial land tax plan is spurring investors to sell off their properties and the prospects are grim for the country’s rental market that’s already knee-deep in a shortage crisis.
Almost one in five or 19 per cent of landlords across Australia are planning to divest at least one of their properties in the next year, according to a new survey by the Property Investment Professionals of Australia (PIPA).
The figures translate into a potential depletion of rental market supply around the nation by 200,000 properties.
If investors follow through on their intention to sell, it could be a detrimental blow to the country’s rental market that is currently struggling with pairing up prospective tenants with an available listing.
At the end of August, data from SQM Research showed that the national vacancy rate stood at 0.9 per cent — the lowest number of available rental listings recorded since 2006.
Gathering insights from the responses of 1,618 property investors, the survey showed that more than one in three investors planning to sell cited Queensland’s new land tax rule as the top reason for exiting the market.
PIPA chair Nicola McDougall pointed out that despite the survey providing investors with more than a dozen potential reasons why they may sell a property in the next year, the Queensland land tax was named the top reason — garnering the vote of almost 31 per cent of the surveyed investors.
The new land tax law, set to take effect in June next year, allows the government to use the total value of an investor’s land holdings — including real estate assets outside of Queensland — to calculate land tax.
Based on the calculations under the new tax regime, tens of thousands of dollars in new tax bills will be piled on the shoulders of interstate landlords and Queenslanders if they own even one rental property in the state and a holiday home elsewhere in Australia.
Since its unveiling, the new land tax has drawn broad condemnation from the property industry, with the Real Estate Institute of Queensland (REIQ) going as far as accusing the state government of treating the property market like a “cash cow” it can milk for profit.
Findings showed that a portion of investors also feel that they have lost control of their real estate assets.
About three in 10 or 29 per cent of investors are thinking of selling because changing tenancy laws have made it too expensive or too difficult to hold an investment property, according to the PIPA survey.
Around 27 per cent of investors stated they are considering offloading their property due to changing tenancy laws that have made it too expensive or too difficult to hold an investment property, while 23 per cent said that the threat of rental freezes enforced by the government has made them hesitant about continuing to invest in real estate.
Ms McDougall cautioned that investor sell-off could have a significant impact not just for investors, but for tenants as well.
“If the percentage of investors who are considering selling winds up doing so, then we are going to see even higher rents as well as a sharp increase in homelessness — especially in Queensland,” the PIPA executive stated.
The survey also showed that there are fewer investors looking to buy in the coming months, indicating that buying sentiment has weakened and a portend of more pain to come for the rental market.
Data showed that only 58 per cent of investors believe now is a good time to invest in residential property, down from 62 per cent in 2021 and 67 per cent in 2020.
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