Land tax cuts in South Australia may fall flat

The South Australian Government’s decision to cut land tax rates to be more competitive with other states may not have the desired affect if additional moves were not made to boost the economy.

According to RiskWise, unlike the NSW Government’s commitment to major infrastructure projects in regional NSW and the Queensland Government’s in the southeast of the state, South Australia lacked the driving factors to compete. south-australia-economy-2017

In regional NSW, the government’s 20-year vision will unlock the potential of the region, improving the economy, creating jobs, providing infrastructure and services and therefore increasing the population.

It all adds up to good news for anyone looking for affordable housing with the long-term goal of solid capital growth.

In southeast Queensland there are some major infrastructure projects taking place and with the improved economy and population growth this is becoming a popular destination for property investors.

However, in regional South Australia the outlook is not quite as positive because we don’t see a strong market, we don’t see increased employment opportunities and we don’t see population growth.

So while we do have pockets that are doing well, such as Central & Hills which had capital growth for houses of 5.1 per cent for the last 12 months – as compared to 4 per cent for Greater Adelaide – it is not something we are seeing statewide.

And while cuts to land tax rates may offer some improvement, when you consider there are other regions, for example regional NSW and southeast Queensland, that will most certainly be a better 

ad_build_wealth
prospect when it comes to long-term capital growth, it’s difficult to see reason to invest in South Australia.

From July 1, 2020, South Australia will enjoy a lower marginal tax rate while the tax-free threshold for land tax will rise from $369,000 to $450,000.

In addition, the marginal tax rate for the value of land tax ownerships between $1.2 million and $5 million will be reduced from 3.7 per cent to 2.9 per cent.

These changes aimed to help make South Australia more competitive with other states but would only be successful if investors were lured in by the prospect of long-term capital growth, however, without supporting factors such as jobs, infrastructure and an improving economy, and therefore population growth, it was unlikely to happen and if it did have an impact, it was unlikely to be sustainable.

The good news was the South Australian government did have plans to improve the economy as evidence in the latest Budget handed down last week.

Among other moves, there are plans to spend more than $11.3 billion on infrastructure over the next four years more than $318 million on the workforce, nearly $278 million on industry assistance and more than $858.7 million on roads.

The question, was ‘is it enough?’.

In fact, the state has suffered from extremely slow population growth thanks to sluggish overseas immigration and a high rate of people moving away to find employment.

According to RiskWise’s latest Quarterly Risks & Opportunities Report, while the labour market has significantly improved in the last couple of years, the effective unemployment in South Australia is still above average and the employment market is still relatively soft. ultimate_adelaide_tour_big_02

This has a strong connection with low population growth and, therefore, low demand for dwellings.

South Australia is projected to continue its economic and growth improvement, however, this is a slow process and is unlikely to result in significant changes to demand in the short to medium term.

So, while there will be some strong pockets, there will also be some negative ones especially when considering issues such as oversupply and a flagging economy.

It might be a good move for owner-occupiers but as a destination for investors it simply may not work particularly when they have interstate options such as southeast Queensland where houses are extremely affordable and projected to enjoy long-term capital growth.

Free Strategy 570x292
icon-podcast-large

Subscribe & don’t miss a single episode of michael yardney’s podcast

Hear Michael & a select panel of guest experts discuss property investment, success & money related topics. Subscribe now, whether you're on an Apple or Android handset.

Need help listening to michael yardney’s podcast from your phone or tablet?

We have created easy to follow instructions for you whether you're on iPhone / iPad or an Android device.

icon-email-large

Prefer to subscribe via email?

Join Michael Yardney's inner circle of daily subscribers and get into the head of Australia's best property investment advisor and a wide team of leading property researchers and commentators.


Avatar for Property Update

About

is the CEO/Founder of RiseWise Property Review. He has more than 20 years’ experience in risk management including, Co-Founder of Peleg, Kessel & Co, an assurance and advisory accounting firm & Executive Manager at Westpac Banking Corporation in Sydney. www.riskwiseproperty.com.au/


'Land tax cuts in South Australia may fall flat' have no comments

Be the first to comment this post!

Would you like to share your thoughts?

Your email address will not be published.
CAPTCHA Image

*


facebook
twitter
google
0
linkedin
0
email
Michael's Daily Insights

Join Michael Yardney's inner circle of daily subscribers.

NOTE: this daily service is a different subscription to our weekly newsletter so...

REGISTER NOW

Subscribe!