It looks like WA property owners are also facing huge increases in land tax bills. At least in NSW the announced the changes to land tax, WA landowners are being caught by stealth!

Land tax increases of up to 400% have landlords in Perth and elsewhere in WA seeing red. The bills are increasing because the Office of State Revenue is increasing the assessed value of the property.

To make matters worse if you the owner has multiple properties the tax is levied at a the rate of the combined properties, not on the appropriate rate for each property.

On the face of the increases are insane - particularly when you remember Perth has had a flat market for the last year or so. The West Australian is reporting that one owner of industrial properties, Joe Pintaudi was faced with:

The assessed value of my properties has gone up from $4.6 million to $9.5 million in the past year. That is ridiculous. Mr Pintaudi said his rents would have to rise by 25% to cover the $67,000 land tax bill

The Property Council of Australia wants the government to introduce reforms that include placing a cap on the percentage increases and land tax to be applied to individual properties, not aggregated values.

The reality is that its pretty crazy that states charge land tax at all. Wasn’t it supposed to have disappeared with the introduction of GST in 2000?  And if you are going to have a tax based on property values then it should be an independent organisation that is assessing the property’s value - otherwise this type of rort is just waiting to happen.

The reality is that the landlord who does try to hike his rents 25% is not going to be in business for long in the current economic climate, where many small businesses are folding  as the mining industry cash cow drys up. Even keeping the tenants at their current commercial rate might be an issue.  This is not a good time to be a commercial or industrial property investor in WA

West Australia specifically set up Keystart to assist first-time buyers who may not be able to get a mortgage from a traditional lender. Why then is Keystart rorting those people?

The Reserve Bank has just dropped interest rates 0.75% this month but KeyStart is only passing on 0.5%. Keystart currentlt has an interest rate of 7.26%  but the big banks have rates as low as 7.07%. What gives - remember this is a government agency! It has a credit rating of AAA because it is backed by the WA government!

According to CEO John Coles:

Keystart held on to some of the Reserve’s November interest rate reduction to guard against a possible rise in defaults from a slowing economy and to cover a rise in funding costs.

He wouldn’t, of course reveal how those funding costs increased.  The AAA rating that Keystart enjoys that is should be paying less for money than the big banks. With the State Government calling for all lenders to pass on the full decrease in interest rates its pretty embarassing that its own state agency hasn’t.

The bureaocracy moves slowly too: some banks have already reacted to last week’s annoucnement of a fruther 1% cut in the Reserve’s rate, but KeyStart’s Board won’t be meeting to discuss that until later on this month. Mr Coles isn’t making it sound likely though.

The reality is that Mr Coles and his fellow directors are playing at being in business. They are state backed so that they can lend to people who can’t get loans elsewhere. They like to think they have the real-world funding and other risks of the big banks - but they don’t.

Maybe it would be better to staff organisations like Keystart with people from the social services or volunteer sectors rather than would-be bankers?

Its the silly season  down under! Its the time of the year when people’s thoughts are about spending too much money for unwanted presents, eating too much and generally going on holiday. Its not traditionally a good time to buy/sell or rent houses.

Except  that’s not what the figures are showing! The Australian newspaper is reporting that:

Saturday auction clearances in Sydney were 45.6 per cent, a 4per cent rise on the previous week. Of 323 auctions, 124 properties sold under the hammer and 51 before the auction.

Almost $102 million worth of real estate was involved in the sales. A four-bedroom house at Karialla Avenue, Lane Cove North, was the most expensive, selling for $1.8 million.

The cheapest was a $176,000 two-bedroom unit at Northumberland Road, Auburn.

Interestingly though the reports are from Sydney that crowds were down and that there was little to no investor interest. Which suggests that instead owner-occupiers are finally starting to react to the 3% drop in interest rates since September, the increased amounts of the first-home owner’s grant, and the general reduction in petrol prices flowing through to people’s pockets.

Melbourne also had an increase of 1.8% in their auction clearance rate to 48%, still substantially down on last years figures.

Adelaide’s clearance rate almost doubled to 37% - but on a very thin market of only 25 properties, so that one goes under statistics and lies!

Brisbane rates were also slightly up to 23.1% from 21.9% the previous but the big news in Queensland is the apparent $21,500 drop in Brisbane house prices to a median price of $473,000 in September. The real estate institute is claiming that this is because there has been a marked increase in properties under $500,000 selling - or maybe they are the only properties priced to meet the market?

The news is good for the Australians - the Federal government wants you to take a break, get to the beach, break open a stubbie and have a holiday!

Bondi Beach, Sydney

The Tourism Minister, Martin Ferguson has suggested that Australians take the 121 million days of leave they are owed and take the holiday at home to help kick start the economy.

Lets face it the property industry isn’t helping the economy at the moment. The Australian Bureau of Statistics reports that building approvals dropped 5.4% nationally October despite the RBA cutting interest rates by another 1% in the same month. The drop of building approvals was worst in Queensland with a drop of 26% . In contrast Western Australia had a slight increase of 2.9%.

Other economic indicators are mixed for Australia. There has been a drop of 22% in new vehicle sales but the dramatic drop in the Australian dollar which now buys around US$0.67, compared to the near parity it enjoyed as recently as June, has seen Australia’s largest ever trade surplus. Coal exports are also at record levels

Overall the economy seems flat but the housing industry in particularly seems to be in the middle of a crises of confidence. You wonder for how long though - as the government’s $10.4 billion stimulus package plus the interest rate cuts plus the rush out of the sharemarket - it all points for a bright future for the property scene.

But not just yet: lets face its December, its summer, its the start of the silly season. So take the government’s advice and get out on the beach - just make sure its an Australian beach!

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