Property Pulse

Looming higher land tax bills could put the Sydney investment market out of reach of the average punter if the NSW government adopts recommendations for a sweeping review of land tax calculations.
A report from the NSW ombudsman calls for the revaluation of every property in NSW to ensure the accurate calculation of land values. Remarkably, it's been 16 years since the State Valuer General reviewed land valuations- that's a decade longer than international best practice.

The report also found an unacceptably high error rate in land valuations, meaning that some properties could be substantially undervalued. The error rate does not surprise property professionals considering the NSW government has been paying contract valuation firms as little as $1.77 per valuation.

You have to wonder why this debacle has been allowed to run on for so long, Especially when it involves the nation's richest state-based market with more than 500,000 property investors.

In principle, I believe it's high time for a clean up of the land tax system, and hats off to the NSW ombudsman for his bravery in calling for widespread reforms. The value of each block of land can be influenced by a wide range of factors - proximity to main roads, railways, freeways, waterways, land gradient, use of surround land and so on. It's only right that land valuations should reflect these various factors.

In practice, the changes could lead to unsustainable increases in land tax bills for NSW investors. This could force many people out of the Sydney market and into the Victorian or Queensland markets, where land taxes and land values are lower.

The annual land tax bill for a NSW investor who owns a property with a $500,000 land component is already $2,200. In contrast the same investor in Victoria pays $800, while a Queenslander will pay $750.

If the Sydney market is to remain a feasible proposition for investors, the NSW government must follow the lead of Victoria and Queensland, where the governments have reduced their rates to offset the rise in property values.

Unless or until the new Premier of NSW, Morris Iemma, announces a review of land tax rates, the prospect of huge tax bills could force Sydney investors to beat a hasty retreat. This would be a blow for the residential market in particular, which was just starting to build momentum after several years of low confidence.

Auction Action

Auction activity returns to normal in Sydney this week after last week's dip when the city stopped for the rugby league Grand Final. Advertised auctions jump from 157 to 268. The increase is pretty much across the board. The exception is the Northern Beaches where the number of auctions listed slumps from 25 to 15.

Melbourne's traditional Spring auction season continues to gather pace with auctions up from 424 last week to 452 this week. For opportunities, look at the inner north where auction numbers almost double from 33 to 63 and the inner east where the number of auctions increase from 28 to 51.

In Brisbane, auction numbers ramp up from 205 to 307. This is an interesting lift in activity given that Brisbane is not known for having a 'Spring auction season'. However, it does reflect the overall increase in properties coming onto the market during the warmer months.

Look for good buying opportunities in southern Brisbane where auction numbers have increased from 27 to 66, and the Gold Coast where numbers have improved from 43 to 74.