The confidence in South Australia's property sector is slowly rebounding after the controversial changes to land tax in the state were given more certainty, according to the latest ANZ/Property Council Survey.
The state-wide confidence in South Australia sits at 117 for the March 2020 quarter, up by 16 points from the preceding quarter. This is the highest quarterly increase on record, said Daniel Gannon, Property Council SA Executive Director.
This improvement came after a 43-point decline in confidence during the uncertainty brought about by the land-tax changes, which passed the state parliament.
"If there is any good news in these numbers, it is that confidence is rebuilding and business uncertainty has been eliminated from the market. Property owners big and small now know what the tax environment will look like from July this year, which is important," Gannon said.
During the state budget process in June last year, the government announced that it would cut the tax rate for property portfolios worth $1.3m to $5m, with lower discounts for those with properties over $5m.
The Land Tax Amendment Bill 2019 trims the top land tax rate from a national high of 3.7% to 2.4%. While this new rate is still higher than those in New South Wales and Victoria, it is lower than those in Western Australia and Queensland.
The changes will prevent high-wealth investors from using separate trusts and company structures to avoid paying land tax. This plan to discourage land-tax aggregation is expected to offset the losses the government would incur with the lower rates.
These reforms are expected to deliver a more competitive, investment-attracting environment that will drive significant jobs and economic growth, said State Treasurer Rob Lucas.
"This is a once-in-a-generation opportunity for significant land tax reform that will benefit South Australians now and into the future. This means that no longer will it be possible for an investor to hold $3m in property in seven separate companies and not pay a single dollar in land tax," Lucas said.
The tax reform will also include a $25m transition fund over the next three years for investors who might be hit by the changes. The changes will take effect starting in July.
"This state's anti-competitive land tax rates and low thresholds have long discouraged investors from looking to invest here. In terms of the residential environment, South Australia's median house price starts with a 'four' rather than ending in 'million' — this means we have a more affordable entry point for investors now combined with a more competitive set of rates and thresholds," Gannon said.
Still, some think the proposed changes could potentially derail the property market and discourage investment.
Shadow Treasurer Stephen Mullighan said "nothing is fair" with the changes, which he said would take millions of dollars from thousands of South Australians.
"These are regressive land-tax increases. They're being applied retrospectively to people's long-held land ownership. It's going to have a real economic impact, it's going to slow investment, it's will slow housing development, and it will slow the state's economy," he said in an ABC report.
The ANZ/Property Council Survey also showed that there is still room for improvement for the state government.
"In terms of the state government's performance, we're still in negative territory. This means there is much work to be done in order to restore trust in government decision-making," Gannon said.
