This week, the Victorian budget was released, with total property tax revenue forecasted for 2018-19 standing at $11.5 billion, 48 per cent of total tax revenue at $24 billion.
Speaking to Accountants Daily, Pitcher Partners partner and executive director, Craig Whatman said the changes in concessions and tightening of the credit market would lead to a softening property market and possible ramifications to the government’s forward estimates.
“What is interesting that we took out of the budget papers is that [property tax revenue] is projected to flatline now to the forward estimates which is the first time we have seen that and that is consistent with what our clients are telling us in terms of softening of the residential market and some of the issues they are now having with their apartment development projects due to the changes to the off-the-plan concessions, stamp duty concessions and land tax foreign surcharges,” said Mr Whatman.
“Now together with what APRA's been doing and what the banks have been doing in terms of tightening up the credit market, that's all combining to have quite a significant impact on the apartment development sector and that may in turn translate into softening stamp duty revenue over time which could have quite a significant impact on the government's estimates.”
Instead, Mr Whatman believes there should be a policy rethink for the changes to off-the-plan duty concession and foreign surcharges that could result in a significant and sustained downturn in the property development sector.
“Our view is that from day one the foreign surcharges were the wrong way to go — that just prevents investments into Victoria that's needed for some of these projects,” said Mr Whatman.
“We understand the government’s concern about housing affordability and there's no shying away from that but the last thing you want to do is create pressures in the market which means that supply dries up because all that is going to do is keep prices up.”
"If such a downturn occurs it would have a negative impact on housing affordability through a decrease in supply, employment — given the significant number of people employed in the building and construction sector, and the government’s bottom line.”