Page 3192 - Week 10 - Wednesday, 18 October 2006
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investment in the ACT was lamented in an opinion piece in the Canberra Times on 9 October by the president of the Real Estate Institute of the ACT, Mr Peter Blackshaw, something to which the Chief Minister made reference yesterday.
He noted the increased prevalence of rental auctioning in Canberra, which is a sure sign that the shortage of rental properties in the city is causing unwanted effects in the market. He pointed to the lack of investment that is occurring in residential property and indicated that a big reason why this is happening is due to the low returns on these investments, which my previous example illustrates perfectly. I might add that, when the Chief Minister was out of the chamber, I talked about the capital gains issue.
Mr Blackshaw pointed out that the city with the highest rents is the city with the highest land tax, and that city is Canberra. He quoted from a survey undertaken by the Real Estate Institute that shows how the owner of an investment property with an unimproved capital value of $300,000 is charged $4,200 land tax in the ACT while, at the same time, New South Wales, Queensland and the Northern Territory charge nothing. The closest state to impose such a tax is Tasmania, at $1,562—a fraction of the ACT rate.
His other point was that in the current investment environment, smaller private investors who are being discouraged by residential property can move easily into shares and other investment options, leaving a vacuum in jurisdictions that offer unattractive terms for property, the ACT being a major culprit. This is what one has to appreciate in the investment market. Investing in real estate is not the only option available to people who have got investment funds at their disposal and who are looking to an environment in which they can get the best return on their money. Clearly, in relation to property in the ACT, this is now coming under a deal of threat because of this tax regime.
Mr Stanhope attempted to refute Mr Blackshaw’s insights in the Canberra Times on the following day—a speedy response. Upon review, his points hardly provide comfort in the situations being addressed, let alone acknowledged, by this territory’s government. First, he said that the investor share in the ACT housing market has virtually remained unchanged since 1991. But when this fact is viewed in the context of the ever-increasing number of people who have moved to the city since 1991 looking for rental accommodation and looking for work, I would not have thought that a stagnant figure of investment is something of which to be proud.
Residential investors may not be leaving in droves, but they are certainly not keeping up with the increased demand for affordable housing in Canberra. If they were keeping up with the increased demand, we would not have this rental crisis. We would not have the highest rental levels in the country, putting an enormous pressure on, particularly, ordinary families, working families, who may have less disposable funds available and are not in a position to acquire a property.
The second thing that Mr Stanhope pointed to was impressive investment returns on three-bedroom houses in the ACT in the year to June 2006. Finding a positive statistical needle in a haystack is all well and good, but it still fails to address the real issue—that rental rates are higher because the costs of maintaining an investment property in Canberra far outweigh equivalent costs in other states and territories.
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