Although the real estate market ebbs and flows more than many people recognise, property remains a preferred—if not THE preferred investment asset for an extensive segment of the investing public.

During the past year we have seen continued strength in the office and industrial markets, decreases followed by increases in residential property values, and some degree of pensiveness with regard to retail as in investment class. 

And as always,  interest and demand are very much a property-by-property phenomenon.

Land tax has become a significant market force in the recent overall positive real estate investment environment which impacts on many long term individual investors.  

Having  become a significant impost on income from large scale and better freehold investments, many investors are being forced to re-evaluate their investment positions:

• The Victorian State Government’s carrot of vastly increased building ratios- and correspondingly increasing values,  has been offset by vastly increased annual land tax assessments.  We commonly find the annual increases for better properties to be in the order of 500 to 1000 per cent over the past few years.
• At 2.25 per cent of assessed land value over an initial threshold, many long term investors are having to re-evaluate the benefit of continued ownership compared to the benefits of realisation in a buoyant market. Many larger income-producing properties are now commonly subject to 30-40 per cent land tax on annual gross rental income, and in some cases, it’s up to double or even more.
• Foreign investment is also being substantially re-evaluated by several well-established foreign investors who are finding the 4.25 per cent annual land tax (which includes the foreign ownership surcharge) to be virtual confiscation of rental income.

Strata vs freehold remains a value determinant, but the market continues to provide increasingly positive recognition of strata subdivided property for investment.

The major positive influences are the availability of smaller but acceptable quality properties, and the much smaller rate of assessed land value, resulting in significantly less land tax.

Gross Waddell’s Directors and Managers are available and happy to speak to you with regard to the land tax impact, possible ways to mitigate it and decisions which may be required in view of the diminished cash flow recently affecting many properties.

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