Land tax hike may hit state’s allure

Land tax increases in the Queensland budget and a lull in development could lead to an increase in home and rental prices.

Land taxes may threaten Queensland’s appeal as an affordable alternative to Sydney or Melbourne.

Land tax increases introduced in the state budget and a lull in ­development could lead to a rise in home and rental prices and threaten Queensland’s appeal as a more affordable alternative to Sydney or Melbourne.

Migration rates are starting to recover after 30-year lows caused by the end of the mining boom. Figures released by the Australian Bureau of Statistics show Queensland had the highest net gain of residents — ­people entering the state minus those leaving — last year compared with other states.

It continues an growing trend for the Sunshine State, where net migration numbers grew 5 per cent from 22,500 people in 2017 to 23,800 last year.

My Housing Market chief economist Andrew Wilson said people were drawn to Queensland because of the relative housing affordability and amenable lifestyle and climate.

But the property industry fears a tax hike imposed on ­developers by the Queensland government in this month’s state budget could end the migration boom. The government has ­increased land tax for holdings valued at more than $5 million from 2 per cent to 2.25 per cent from June 30, while the rate for holdings over $10m will increase from 2.5 per cent to 2.75 per cent.

Mr Wilson said the decision was counter-intuitive to the trends, stunting the industry at a time when job creation was needed. “We’re certainly seeing that now that vacancy rates are falling, there is upward pressure on rents; the development cycle has basically collapsed,” he said.

Housing Institute of Australia’s Queensland executive director Michael Roberts said better policy was needed from all levels of government to encourage ­interstate migration.

“Queensland state and local government need to create policies that complement this growth and not discourage it,” Mr Roberts said.

“It is nonsensical on one hand to have policies that encourage and support the provision of housing at an affordable price and on the other hand increase land tax, introduce waste taxes, ramp up industry-based levies and impose restrictions, for ­example, on the construction of townhouses.

“Continuing to add levies and taxes imposes artificial constraints on building activity, driving house prices up.”

The apartment glut that caused the market to suffer through 2016 and 2017 is set to be absorbed, with low stock levels potentially reducing affordability. However, a boost could give the state the bump it needs to grow.

“It’s not unrealistic to expect prices up at around 5 per cent-plus on an annual basis, given that demand is pushing ahead of supply, even with lower interest rates,” Mr Wilson said. “The only question mark is the economy in Brisbane, with that higher unemployment level.”

Should development kick off in southeast Queensland, Mr Wilson says the strong population position could make the Brisbane market the strongest per capita city performer.