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Property investors are urging the Australian government to change tax deductions for travel expenses related to their investment property as a way to stimulate the regional housing market.
According to the Property Club, over the past three years there has been a dramatic fall in property investment activity in regional markets, which started when then treasurer Scott Morrison banned travel expenses for property investors in the 2017 federal budget.
“As a result of being unable to claim tax relief to travel to their rental properties, investors effectively lost control over their investments in regional areas because they were financially penalised from inspecting their own properties for critical maintenance issues.
“This inability can have a huge impact on the capital and rental growth performance of their investment,” Kevin Young, president of Property Club, said.
The Property Club CEO pointed to the combined value of investment loans in Queensland, South Australia, Western Australia and Northern Territory, which has fallen by $900 million per month since investors are no longer able to claim expenses related to travelling to their property.
“Back in June 2017, investor home loans in these four regional areas of Australia totalled $2,047 million, and by June 2020, this had fallen to $1,137 million,” Mr Young said.
The regional market that has been hit hardest is Queensland, with investment loan activity falling by nearly half over this three period from $1.2 billion to just $680 million.
“This lack of property investment activity has seen vacancy rates in these regional areas fall significantly over the past three years.
“For example, during July 2020, Darwin recorded the largest recorded decline in rental vacancy rate of 0.4 per cent to a now record-low vacancy rate of 1.4 per cent, while the vacancy rate in Adelaide is less than 1 per cent and just over 1 per cent in ,” Mr Young explained.
“This ban on travel expenses should be reversed in next month’s federal budget as these regional property markets are dependent on property investors buying property from Sydney and Melbourne,” Mr Young said.
“These property investors have traditionally bought investment properties in regional properties markets because they could claim tax deductions for travel expenses until 2017.
“When border restrictions are lifted, investors once again need to have the financial ability to visit and inspect their investment properties in other areas of Australia, which in turn will stimulate property investment activity in these areas,” he said.
Property refers to either a tangible or intangible item that an individual or business has legal rights or ownership of, such as houses, cars, stocks or bond certificates.