With many developers facing tougher trading conditions this year, you’d think that any assistance in reducing purchasing costs would be a welcome stimulus.
Experienced developers know all too well that it’s not only their own project and acquisition costs that are critical to their bottom line. But that the impact on their top line revenue or gross realisation can be heavily affected by the additional acquisition costs incurred by purchasers of the developer’s finished product.
Effective from 1 July 2018, the ACT government have abolished stamp duty on commercial property transactions under $1.5 million.
This was expected to benefit more than 70 percent of commercial transactions and agents are reporting increased inquiries for off the plan mixed use developments with some sales under negotiation before July 2018 deferred to after July 1.
The scrapping of the duty now saves purchaser’s up-front costs of more than $70,000.
There are however mixed reviews as some agents say they’re not seeing any increased demand and are critical the policy has not been sufficiently promoted by the ACT government.
An ACT government spokesperson said it was too early to provide definite data on the effects of the reform.
The ACT government began a 20-year program in 2012 to reform the territory’s stamp duty system and replace stamp duties with broad based property taxes.
As a result, statutory rates have increased for commercial properties and compounded by softening gross rents, net rents are diminishing and are negatively affecting capital values. This has been benefitting the Queanbeyan (NSW) commercial market. Although to offset these issues, is a lack of new development to meet the demand for industrial property in the ACT, as businesses are increasingly looking to buy rather than rent.
Warehouses in Fyshwick and Mitchell have a lower vacancy rate and the warehouse market is becoming tight, with prospective tenants looking for distribution-type complexes with semi and B-double access.
Overall the increase in statutory outgoings as a result of the new stamp duty policy is being offset by low vacancies and improving rents in some areas, with landlords more motivated to hold rather than sell.
Although there has been some drift to Queanbeyan this has also been attributed to rising values in the ACT and the lack of stamp duty for commercial property in the ACT up to $1.5 million is a positive development.
However, without further yield compression, commercial rents need to improve further to offset increased statutory outgoings to improve the viability for commercial and mixed-use developments.
