Soaring land values come with a cost for all owners
Inner-Brisbane is going through a development boom. There’s rarely a time we use such strong language in this blog but it’s a fair assessment of the amount of new apartment construction underway, and the massive demand from developers has created some extraordinary hikes in land prices. Many of these development sites are changing land uses. They were commercial or light industry, under-utilised for their near-city location in many cases, and their former owners saw future capital gains brought forward with this strong property cycle.
But for all the winners from this spike in prices, there’s now a flow-on impact for most inner-Brisbane property owners. The state government makes their own guess at your land’s value every year and, while you can dispute the number, that’s the amount used to determine your council rates and land tax bills. Over the past fortnight land tax assessment notices have arrived in the mail, and there’s no prizes for guessing the government believes inner-Brisbane land has risen in value. In many cases by a lot.
It’s not just house owners who’ve been caught. We recently spoke with a South Brisbane investor, owner of one apartment in a block of 7. As that land now has a taxable value of $3.25m she’ll now pay rates and tax on her share of $464,000. For her tiny, old apartment. The threshold for land tax in Queensland is $600,000 or $350,000 if you own the property in a company name so you don’t need to own a big portfolio to be a land tax payer. (Interestingly there’s a tax ‘bracket creep’ here that never gets media airtime).
Across Brisbane’s inner-city property owners are getting their very first land tax bill. Regardless of the value of the improvements or the rental income, there’s a new tax to pay. And have you wondered why some commercial/industrial property owners have agreed to sell when many speculated their sites would be ‘locked’ for generations? Some had tenants on leases that couldn’t be increased to compensate a land tax rise. In some cases owners had annual rent of $200,000 with a land tax bill of $150,000.
And of course council rates are rising too. Brisbane City links your amount to the land value so it would be hard to find an inner-Brisbane property owner, residential or not, whose rates are not about to jump.
So while many of us can celebrate owning a property that’s gone up in value, for some, the new holding costs will be significant.
Please share your thoughts in the comments below…