ACT Canberra land tax laws

Discussion in 'Where to Buy' started by Serveman, 15th Oct, 2018.

Join Australia's most dynamic and respected property investment community
Tags:
  1. Serveman

    Serveman Well-Known Member

    Joined:
    17th Apr, 2017
    Posts:
    176
    Location:
    Kings langley
    Are Canberra's "No threshold" land tax rates high enough to put you off buying an investment property in Canberra. On the flip side you have low unemployment, high rents, but prices to get into this market are high unless you buy a unit.
     
  2. Kassy

    Kassy Well-Known Member

    Joined:
    21st Jun, 2015
    Posts:
    503
    Location:
    Canberra
    We are currently living in a ppr in Canberra. We are Queenslanders and will sell up when we go back so the answer is 'yes' for us. With land tax the yield isn't there. Our IP's are also elsewhere.

    We have enjoyed living here though, probably my favourite house and location.
     
  3. Cimbom

    Cimbom Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    1,373
    Location:
    Back in Canberra!
    If I was looking for an IP, it wouldn't put me off. We have rented out our house before but are living in it at present
     
    Serveman likes this.
  4. Todd

    Todd Well-Known Member

    Joined:
    16th Oct, 2016
    Posts:
    93
    Location:
    Canberra
    Personally I think it has put quite a few investors off buying in the ACT and some have sold out. It's contributed (just one factor) to the very tight vacancy rates and the increases in rent. So for those investors who are staying in the market or coming in it means rent increases and low vacancies. For a detached house you can be looking at 4-7k in land tax alone per annum, plus very high rates. Can equal about 10k + per annum to hold a house compared to say Brissy that is around 6k to hold a house. Units can still be cashflow neutral in some areas (but poor growth prospects across the ACT for units) but it's tough to find a house that's cashflow neutral or positive if you are buying in now. For those who bought 3-4 years ago or longer than that then buy in prices were lower and rents now higher so it's ok for them, most will continue to hold I suspect. I don't think the lack of investors though will affect CG going forwards in the ACT for houses as it's an OO driven market.
     
    Rugrat, orangestreet and Serveman like this.
  5. Toilandtrouble

    Toilandtrouble Well-Known Member

    Joined:
    19th Mar, 2017
    Posts:
    136
    Location:
    ACT
    I think it comes down to cash flow and what you want out of an investment. If your only aim is capital gains and you are comfortable with poor cash flow and the Govt draining your money then OO style detached housing will perform well in capital growth. Housing starts for detached houses are dropping and the Govt continues to release less lots per year.

    In my opinion 99% of the units in Canberra should be avoided by investors. Cash flow will be drained, the capital growth outlook is poor and the Govt has already flagged an intention to flood units in the future and build up.

    So to answer your question, yes for units, maybe for detached houses.

    Also agree with @Kassy , Canberra is an amazing place to live! Best kept secret.
     
    orangestreet, Kassy and Serveman like this.
  6. S1mon

    S1mon Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    538
    Location:
    canberra
    obviously it depends but for me its about 25% of gross rent lost to rates/land tax. that is an entry level house, i guess if I had a nice new house then the rent would be higher and that % smaller. the thing that worries me is that it will compound away forever and a day , way faster than inflation.

    I would not buy here again. maybe if it was the only state or capital in Australia, but when there are plenty of other markets...
     
    Kassy and Serveman like this.
  7. Toilandtrouble

    Toilandtrouble Well-Known Member

    Joined:
    19th Mar, 2017
    Posts:
    136
    Location:
    ACT
    craigc, Todd, petewargent and 2 others like this.
  8. S1mon

    S1mon Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    538
    Location:
    canberra
    an impressive low vacancy rate (or unimpressive depending on how you look at it), considering so many apartments..imagine if there was no apartment oversupply! (ok sure, you can argue there is no oversupply if they are all rented). i certainly agree there are less investors than there otherwise would be if no land tax/or a reasonable land tax, but must be masses of students or something that bring with them a lot of rental demand also.
     
    Todd, Kassy and Serveman like this.
  9. AnDy62

    AnDy62 Active Member

    Joined:
    25th Jun, 2018
    Posts:
    32
    Location:
    Australia
    A war story. A bought an older style unit in Kingston (2/1/1) a couple of years ago for ~400k. Land tax shot up from around $450 a quarter to around $700 a quarter. On top of body corporate and rates, the holding costs were astronomical. Thankfully I moved in and so now don't pay the land tax, but it would have to be a very attractive gross yield to tempt me to buy an investment here.

    As a side note, it would probably go for at least $430k now, so not all units in Canberra are a disaster. But I think you need to buy smart (central, low body corporate with some uniqueness factor).
     
    Serveman likes this.
  10. Serveman

    Serveman Well-Known Member

    Joined:
    17th Apr, 2017
    Posts:
    176
    Location:
    Kings langley
    Yep, quite a consistent view about land tax issues here, but also interesting to note that quite a few people who have posted in this thread, choose to live in Canberra, must be pretty good lifestyle.
     
    Toilandtrouble and AnDy62 like this.
  11. bunkai

    bunkai Well-Known Member

    Joined:
    28th Jun, 2015
    Posts:
    435
    Location:
    NSW
    Land tax is depressing but the upward pressure on yields is undeniable. Given Canberra rental market was already relatively expensive, it is not great for tenants. I assume someone who developed the policy shift to land tax thought about this....

    and I don't live in Canberra

    EDIT: Unimproved values jumped this year so annualised rates are now up 4-10% ... So for the first time it isn't just investment/tenants being slogged.
     
    Last edited: 24th Oct, 2018
    Serveman likes this.
  12. Toilandtrouble

    Toilandtrouble Well-Known Member

    Joined:
    19th Mar, 2017
    Posts:
    136
    Location:
    ACT
    We recently sold our apartment in Canberra, but in Jan 2018 we increased the rent by $20 to $490 (we had people offering $495 when it was open for tenants) and it looks like the standard rent for like-for-like would now be $510-$520. Quite tough for renters, but I guess that isn't an issue for the ACT Government.
     
    AnDy62 and Serveman like this.
  13. AnDy62

    AnDy62 Active Member

    Joined:
    25th Jun, 2018
    Posts:
    32
    Location:
    Australia
    Yep, it's textbook economics. Change incentives, change behaviour. Investors are rationally pulling back from the market. In other words, the rental market has had a shock which has increased rents (land tax's incidence has shifted away from fully being levied on investors).
     
  14. SatayKing

    SatayKing Well-Known Member

    Joined:
    20th Sep, 2017
    Posts:
    1,466
    Location:
    Australia
  15. oracle

    oracle Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    563
    Location:
    Canberra
    More bad news for renters...

    Full article here

    None of the above is surprising to be honest.

    Cheers,
    Oracle.
     
  16. Cimbom

    Cimbom Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    1,373
    Location:
    Back in Canberra!
    It should be more expensive than Sydney though. As a percentage it definitely has more higher paying jobs and also has a higher average salary.
     
  17. geoffw

    geoffw Moderator Staff Member

    Joined:
    15th Jun, 2015
    Posts:
    5,271
    Location:
    Canberra
  18. AnDy62

    AnDy62 Active Member

    Joined:
    25th Jun, 2018
    Posts:
    32
    Location:
    Australia
  19. Aaron Sice

    Aaron Sice Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    1,402
    Location:
    Ocean Reef, WA
    Considering you don't actually own the land in the ACT, how do they levy the leaseholder with a tax?
     
  20. Terry_w

    Terry_w Mortgage broker licenced 4 tax/legal advice Business Member

    Joined:
    18th Jun, 2015
    Posts:
    19,486
    Location:
    Remote
    On the leasee
     
    Scott No Mates likes this.