Stop pointing the gun at landlords

The NSW Government has just introduced a stealthy tax by freezing the tax-free threshold for property investors, landlords and holiday homes. The land tax threshold has now been frozen at $1.075m. As land values rise exponentially across the state, this will immediately capture another $1.5bn in taxes and continue to rise year on year. In NSW and Victoria, where property taxes are seemingly at tipping point, we’re seeing an exodus of investors, with the sale of Victorian investment properties rising 34 per cent from last year and Sydney rising 17 per cent. Increasing land taxes layered on 12-year high interest rates are suffocating many landlords, which comes despite rents rising at the fastest pace in more than a decade.

Landlords have been a hot topic in the media lately, quite often painted in a poor light as being greedy and taking an uncompromising approach to tenants. We’ve had enough of the constant landlord bashing and we’re well placed to put forward a well-informed view given that we manage more than 4,000 rental properties in some of the most competitive markets in Australia. Having managed property for 30 years, we’ve seen all the Government changes and legislation that have continued to creep further and further into the anti-landlord space. Granted, some changes have been needed, but like most Government creep, one can look back over a period of time and wonder how we got this far down the track.

 

That the NSW Government has frozen the land tax threshold while simultaneously implementing policies that drive rising land values is one thing, however there is more coming. The ‘no grounds 2024’ bill is to be inserted into the Residential Tenancies Act, which is spewing out all sorts of fear- mongering against landlords in yet another misguided piece of policy. At what point does the Government self-reflect and ask if landlords are really the problem or is the Government responsible for insufficient funding of appropriate housing, opening the flood gates on migration and not having anywhere near the infrastructure to sustain the rapid population growth. We can say with utmost confidence that the vast majority of our landlord clients are everyday Aussies who have purchased an investment property to try to edge a little further forward in this tax-heavy society. Many invested near their current home as they love the area and community, others have retained their first purchase which has sentimental value, and many plan to leave a property for their kids.

Every landlord has had to make major sacrifices to secure an investment property. The ongoing bracket creep of stamp duty is known in Government as the river of gold. Land taxes over the past several years have skyrocketed. In fact, so far have they climbed that we recently sold a property where the Government-prescribed land value was higher than the sale price we achieved for the improved home sitting on the land. Unlike shares, landlords are helping to stabilise the local community, offering properties for lease while paying stamp duty on the way in, yearly land tax which continues to climb and 12-year high interest rates, all of which have smashed yields. Add in all the other crazy cost-of-living issues and skyrocketing building costs and it’s little wonder we have investors fleeing the market.

 

There is no question that investors enjoy rising rents and capital appreciation. There is also negative gearing, although the tax office has significantly cracked down on this to the point that it’s barely an advantage. However, capital appreciation is currently moving at a snail’s pace and even if an investor achieves some growth, the Government is there for its piece of the profit via capital gains tax, despite bearing zero risk. Every landlord does their fair share in contributing to the economy and to be lambasted on the way through is simply unfair.

 

There needs to be far more creative solutions that don’t start so far down stream. The Government need to improve the functions of state and local councils to improve speed and efficiencies in order to build more properties across all price points. The Government may very well consider reducing some investors’ land tax if they discount their rent to accommodate essential workers in more expensive suburbs. There are more solutions than constantly targeting landlords, because at this rate the state is looking at dismissing rental opportunities which will only increase competition and prices for the smaller pool of existing stock.