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State of stagnation: Govt warned of looming market "catastrophe"

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“Fear of the unknown” amid ongoing uncertainty about the Marshall Government’s looming land tax shakeup is strangling the property market, the sector says, as Treasurer Rob Lucas concedes even his best-case compromise scenario would not be “nationally competitive”.

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A proposal in the June budget to claw back $40 million a year from investors “unfairly” avoiding paying their “fair share” of land tax has had industry groups – and Liberal backbenchers – up in arms for weeks now, with the Government seeking feedback ahead of proceeding with formal legislation.

But stakeholders say the ongoing uncertainty has seen the market stall – a point it’s understood was made directly to Deputy Premier Vickie Chapman at a public Q&A session in her electorate last night.

Constituent Steve Maras, the CEO of the Maras development group and Property Council State President, confirmed there was broad disquiet at the meeting about the Government’s plans, arguing the ongoing uncertainty was “spooking the market”.

“I have spoken with several residential agents, developers and builders who are all telling me the same thing: interest in purchasing – predominantly for investment, but also for owner occupation – has just fallen off the cliff,” he told InDaily.

“People aren’t turning up to open inspections, because they’re fearful of the unknown… think about it logically: if you don’t know where land tax is going, but you know there could be a horrendous increase, you’re not going to make a decision on buying right now.

“I think it’s having an impact on driving pricing down.”

Concern about the Liberals’ plans is compounded by fear property prices – and corresponding fees and charges including land tax, council rates and emergency services and natural resource management levies – will skyrocket in some areas once an ongoing revaluation by the Valuer-General is complete.

Maras said that process “is being rolled out right now and we won’t know till mid-next year” what the impact will be.

He confirmed he urged Chapman to “throw this aggregation policy on the scrapheap”, saying investors were “scared because there are two things running in tandem that have the potential to clearly blow things out of the water”.

“Over the last two months, I’ve seen a significant drop in business sentiment, and certainly business confidence and investment in SA, because of fear of what’s looming,” he said.

“The full effect of all this statewide won’t be known till this time next year… imagine if we have a year of standstill. For a year people won’t buy and a lot will want to sell – we’ll have a year or more of stagnation.

“That right now would be catastrophic to our economy.”

Another attendee at the meeting, Majestic Hotels founder John Culshaw, told InDaily “the market generally has got problems”.

“I believe it’s stalled,” he said.

“The market is definitely very quiet… particularly on the investment side.”

He said the planned changes – and the impact of the uncertainty since the June budget – was “damaging the market and damaging the economy”.

Culshaw confirmed he sought “a show of hands” last night of “those who are having difficulty selling at the moment”.

“There were a lot of hands up,” he said, adding Chapman “was listening, which was refreshing”.

Culshaw has also spoken directly to Lucas in recent weeks, in a meeting he described as a “polite and businesslike exchange”, while it’s understood senior Government figures including Lucas and Premier Steven Marshall have also been lobbied directly on the issue by influential business figures, including influential hotelier Peter Hurley.

But the Treasurer dismissed broad industry concerns, saying recent surveys suggested business sentiment remained “positive and optimistic from a Government viewpoint”, and arguing critics were “significantly short of the sort of detail” required to calculate the aggregation impost before “the final Bill is actually produced”.

He said legislation would be ready by the end of this month or the first week of September to go out for public consultation, “and then the plan would be to introduce the Bill by the end of September”.

That seems likely to retain the aggregation element, but introduce the promised reduction in the top land-tax rate from 3.7 per cent to 2.9 per cent more quickly than previously planned – and perhaps immediately.

“Certainly that’s the clear message in terms of a lot of the responses – ‘we hate aggregation but if you’re going to do aggregation we have to move more quickly to reduce 3.7 per cent to 2.9 per cent’,” Lucas agreed.

“That’s certainly the consistent theme from people we’ve spent the past eight weeks consulting.

“There’s a whole series of people who are I guess concerned that their current investments might be impacted, but it’s easy to make claims at this stage… we’re very close to getting much greater detail in terms of the draft Bill, but you can always start planning for what to contemplate based on what NSW and Victoria have already got in place.”

However, NSW and Victoria have top rates of 1.6 and 2.25 per cent respectively, with Lucas conceding he can’t match that level “in the short-term” – and admitting that meant even a reduction to 2.9 pert cent would not be “nationally competitive”.

“In the long term we think we should have a nationally competitive land tax rate, which obviously infers a lower one [than 2.9 per cent],” he said.

“That [2.9 per cent] is still higher than what would be a national average rate.”

Culshaw said he had already modelled the aggregation reforms on an estimated 2.9 per cent rate and “still got ridiculous results”, adding that the Government would still reap their budgeted $40 million if the top rate was as low as 1.87 per cent.

“In my case the land tax bill goes up by about 76 per cent,” he said.

“I don’t really think they’ve done the numbers properly… in other states where we’ve got aggregation we’ve also got a realistic rate.”

He said the Government did not appear to have understood “the consequences of what they’re doing”.

“There’s all sorts of implications in what they’re doing – it’s going to add costs to everything… this thing is so poorly thought through I can’t believe it was put out there in such an unconsidered way, with no consideration to the Valuer-General’s process,” Culshaw said.

“The whole system hasn’t been thought through… people are looking at just dumping property [and] this whole thing has been caused by an ill-considered concept in the budget.”

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