The Queensland State Government has made several significant announcements in the state budget affecting the development and real estate industries which will take effect from 1 August this year.
The principal measures relate to:
1. The introduction of a short term stimulus package (called the “Building Boost”) to buyers and investors of new residential properties with a value not exceeding $600,000;
2. The abolition of the concessional rates of duty for purchasers of a property that will be used as their principal place of residence (other than for first home buyers);
3. Changes to the rates of duty generally.
Building Boost
The Building Boost is a short term incentive for purchasers of real estate which will be used as a residence within 12 months after settlement, and that is contracted between 1 August this year and 31 January 2012.
It will also be payable to:
1. new home builders subject to the build contract being entered into during these periods with commencement within 26 weeks and completion within 18 months after commencement;
2. owner builders who commence during this period and complete construction within 18 months;
3. purchasers of "off the plan" units who enter into a contract during this period, provided completion occurs by 31 July 2013.
Additionally, first home buyers will be able to get the Boost and the applicable first home owner's grant of $7000.
DUTY CHANGES
The duty liability of purchasers of real estate has, overall, been marginally reduced but, with the elimination of the home concession, the cost of purchasing a home has effectively increased by as much as $7,000. The new rates are set out in the link above but a stark illustration is that of the duty payable for a modest home valued at $480,000 will increase from $8,050 to $14,625. A big number for a purchaser in that market.
WE SAY
Reports in the media indicate that the changes have already received a mixed reception from the industry.
The obvious winners are those developers with a product that is ready to be contracted for sale in the period of 1 August this year to 31 January 2012, whose buyers will be provided with an immediate discount of $10,000 on the ticket price. The field is somewhat limited by the time constraints set in these measures but we expect an uptick in presale activity in the immediate future.
Based on the smaller number of residential conveyances we are seeing, we can only assume that these measures will not help the relatively flat market for existing residential properties. Those buyers looking to upgrade their home may see these additional costs as enough take them out of the market. That said, this might also get some home-buyers into the market during the next 6 weeks before the changes become law.
Clearly, there are systemic issues in the development industry relating to the cost of development, bureaucratic delay and access to funding that need to be addressed. Short term stimulus will, no doubt, be welcomed in parts of the industry but it is clear that there are meatier issues that continue to be largely ignored by government.
Rob Lalor is a Senior Associate at Redchip Lawyers in Brisbane. His specialist areas of expertise are in property development, including land subdivision and community titles scheme developments, and private treaty mergers and acquisitions. Rob manages the firm’s commercial property and real estate practice and has overall responsibility for the residential and commercial conveyancing team.
