The world according to GRP — Monday, January 21, 2008:
Mutual obligation for property bludgers
Responding to Demographia's unflattering survey on housing affordability ("High prices end Australian dream", the Age, Jan.21), the Property Council of Australia repeats the usual demands that State governments cut developer taxes, release more land and reduce red tape.
No amount of tax-cutting will stop developers from reaping the uplifts in land values caused by permission to develop and by provision of infrastructure.
Releasing more land and reducing red tape will neither induce developers to proceed with developments that have already been approved, nor induce property owners to build housing on vacant lots or seek tenants for locked-up houses (which do not appear in official vacancy rates because they are not available "to let").
But if every investment property is deemed to be earning an annual income of at least 3.5% of the assessed value of the site (excluding buildings) for tax purposes, then property owners will have to arrange their affairs so that their real income matches or exceeds their deemed income. So land approved for development will get developed, and vacant lots will be built upon, and empty buildings will be offered to tenants or buyers.
The exclusion of buildings ensures that the deeming rule does not discourage construction. The suggested 3.5% rate is equal to the base rate at which pensioners' financial assets are deemed to be earning interest under the income test. The official purpose of "deemed" interest is to encourage pensioners to seek higher returns on their assets. If that's good enough for pensioners, it's good enough for property "developers" and "investors".
[Featured at Rants 'n Reviews.]
Copyright © Gavin R. Putland except as otherwise attributed. Posted at The world according to GRP under the title Mutual obligation for property bludgers. You may republish this item verbatim on your website or blog provided that you include this notice (with hyperlinks).
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