An annual land tax that could potentially replay stamp duty has been criticised by the property industry.
Property Council of Australia chief executive Ken Morrison said he welcomed possible government plans to scrap stamp duty, which he called “Australia’s least efficient and most unpopular tax”, but a shift to an annual tax could be complicated and costly for families.
“In modelling for the Property Council, Deloitte Access Economics estimated that the average ‘land value property’ would need to pay $2400 a year,” he said.
“However, this is an Australian average. Different underlying land values would produce very different tax outcomes with many suburbs paying $5000 a year or more.”
An overall increase in the GST was recommended by the industry body as an alternative option to stamp duty.
Advantage Property Consulting director Frank Valentic said the change would be “replacing one bad tax with another”.
“Victorians are already among the highest taxed property owners,” Mr. Valentic said.
“It could really be hitting people with a double whammy if forced to pay another tax on top of rising council rates and other levies every year.”
He said low-income earners and retirees would struggle to pay thousands of dollars in added tax each year.
But the change could also lead to a spike in the number of properties hitting the market.
“A lot of older people have previously put off downsizing because of prohibitive costs of selling like stamp duty … they may now decide to sell,” he said.
“Some investors may also decide to sell if there are too many annual fees to pay on a large property portfolio.”
Real Estate Institute of Victoria president Leah Calnan said the body would “not be in favour of the government introducing any additional taxes to property owners in the state”.
“We already have 19 taxes that are payable through the property sector, which contribute to 48 per cent of the state’s income,” Ms Calnan said.
“We’ve been speaking with the government for many years in regards to reducing stamp duty calculations, because Victoria has some of the highest rates across the country.”
She said a removal of stamp duty would encourage people to transact more frequently.
Real estate agents including Samuel Property director Illan Samuel said real estate activity could spike after coronavirus if the changes were made.
Ray White Mt Waverley director Jay Warnak said it was important the government found a way to be “equitable” with the tax.
Previous estimates suggest the reform could grow the national economy by $20 billion.
Stamp duty and land tax — the latter now paid only on commercial properties and investment homes — was forecast to bring $9.5 billion into Victoria’s coffers this year, about 40 per cent of the state’s total tax take.
But the pandemic is tipped to send property prices tumbling 9 per cent, blowing a hole in stamp duty as sales volumes also fall.
A property market slowdown, which eased late last year, had already blown a $5.2 billion hole in stamp duty revenue, highlighting its volatility.
Australia's tallest tower will be built in Melbourne after the construction project was given the go-ahead for development.
The $2billion Southbank by Beulah - nicknamed the 'Green Spine' - building in Melbourne will have two twisting towers - with the tallest to hit 365m and the other reaching 253m.
There will be private residences, commercial offices, a five-star urban resort, conference and entertainment centre, and green spaces among the 270,000sq m mixed-use precinct.
The Victorian government announced on Friday that it had approved the project on City Road, which is one of four projects worth more than $3.5billion in total being developed in the same area.
Dutch architecture firm UNStudio and Melbourne-based Cox Architecture designed the building.
It will also include a separate 56-storey twisting tower and will dwarf the nearby Australia 108, which stands about 319 metres, and Queensland's Q1 which is about 322m.
'The ambition of the project is twofold – a building that is a city in itself, with its multitude of programs and connectivities,' Cox Architecture said.
'As well as being fully integrated in the existing city network of cultural, entertainment, leisure and commercial offerings.'
The project is being led by Melbourne developer Beulah and is expected to create more than 4700 construction jobs.
Construction is expected to start in 2021 and take five years to finish.
The 'Green Spine' is part of the Building Victoria's Recovery Taskforce set up by Minister for Planning Richard Wynne which will ensure building projects will continue development during the coronavirus pandemic.
'This taskforce will help ensure the building and development industry is a driving force for Victoria's economy through this pandemic and beyond,' Minister Wynne said.
'It will help deliver existing projects more efficiently and assist new projects to get off the ground faster.'
He has also approved building projects for a 35-level office building at 555 Collins St, a 26-storey tower office at 52-60 Collins St and a 300-apartment building at 550 Epsom Road Flemington.
Minister Wynne and Treasurer Tim Pallas will oversee the project, which will investigate planning and investment opportunities to boost Victoria's building and development industry over the short, medium and long term.
The real estate industry has welcomed the revival of face-to-face auctions and open for inspections in Victoria, labelling them “sensible” first steps now the coronavirus curve has flattened.
The Victorian Government has announced that from 11.59pm Tuesday, May 12, auctions and inspections will be allowed with attendance limits of 10 people, in addition to the “minimum number of people reasonably required to facilitate” them and a residence’s occupants.
Agents will also be required to keep records of attendees’ names and contact details, to “assist in contact tracing if required”, and enforce social distancing and hygiene practices.
But Victorian auctions have only been able to be held online, and prospective buyers and tenants only able to inspect properties digitally or one-on-one with agents, for the past six weeks.
Real Estate Institute of Victoria president Leah Calnan labelled the Victorian Government announcement a “good step forward”.
“While agents have been very agile to embrace technology, it will be reassuring to resume face-to-face. Real estate is a face-to-face business,” she said.
Ms Calnan expected the “new norms to come together” in the auction sphere, with many agents to continue using online auction platforms in conjunction with small public gatherings of bidders.
“We won’t be able to have every person who wants to bid or watch the auction be in physical attendance,” she said.
“But (having 10 in attendance) makes it very transparent — people will be able to see who they’re bidding against again.”
Ms Calnan said would-be vendors turned off by COVID-19 restrictions may now reconsider selling, especially in the lead up to the spring selling season, which she now expected to be “relatively strong”.
This had broader benefits given taxes derived from property sales contributed more than 45 per cent of the state’s budget, she said.
The REIV previously stated auction volumes had “fallen significantly” following the Prime Minister’s ban, from the pre-pandemic average of almost 1000 per week to about 100-150 per week.
Buyers of freshly built homes would get a $50,000 cheque from the Morrison government under a $2.5 billion plan from the Property Council to kickstart the economy amid Reserve Bank warnings the housing sector faces an extended period of pain.
The council also wants the abolition of stamp duty, the broadening of the GST and a "welcome migration" campaign aimed at luring foreigners to Australia. On Wednesday, the group said without change the residential sector would weigh on the economy in the wake of the coronavirus pandemic.
Home builders have already reported contract cancellation rates of more than 30 per cent since the shutdown of key parts of the economy to prevent the spread of the virus, while the construction sector, which employs more than 1.1 million people, has shed at least 5 per cent of its workforce since March.
Council chief executive Ken Morrison said bold policies were needed to get the economy, expected to shrink by 10 per cent in the June quarter, re-started with the housing sector a key element of the recovery.
“As Australia’s biggest employer which contributes over 13 per cent of GDP, the property industry can be a powerhouse behind economic recovery and growth with the right policy settings and market incentives from the federal, state and territory governments,” he said.
At the heart of its proposals is a $50,000 "new home boost" for buyers of new housing, which the council estimates would stimulate the construction of 50,000 dwellings and support 200,000 jobs.
It would dwarf the $21,000 in grants that were available to first time home owners who bought new buildings during the global financial crisis under the Rudd government's stimulus program.
The program would run for 12 months and be limited to 50,000 properties, while there would be no cap on the value of the home.
The council is also calling for major tax changes to support the sector, including the removal of state stamp duty and its replacement through a broadening of the GST base. Only four large areas, including fresh food, education and health, are excluded from the GST.
The Morrison government is expecting net migration numbers to collapse this financial year and next due in large part to the restrictions on global border movements.
The council wants a "Welcome to Australia" migration plan that would include a major advertising campaign to promote the country as a safe and healthy destination. It argues the current points system for skilled migration should be temporarily lowered and people encouraged to live in major capitals as well as regional centres.
Housing construction and the property sector is growing as an issue for the Reserve Bank, which noted in the minutes of its most recent meeting that a drop in employment, incomes and wealth will have a direct impact on general consumer spending.
The minutes, released on Tuesday, show building companies are already reporting a drop in demand for new and established housing while cash-strapped Australians are moving back in with their parents or share-houses.
"Lower incomes and confidence, as well as lower expected population growth, were expected to affect demand for new housing for an extended period," the minutes showed.
There are also concerns about the commercial property sector, with rents in major capitals expected to fall with many businesses having staff working from home rather than CBDs.