Hidden tax boosting property values
Investors buying off-the-plan dwellings in one of Australia's largest cities could be getting slugged by a little-known tax that is also inflating existing property prices, according to research.
Research from the Queensland University of Technology claimed new property prices in Brisbane may be inflated by up to $131,000 as the result of a little-known infrastructure tax.
To continue reading the rest of this article, please log in.
Create free account to get unlimited news articles and more!
This is the result of infrastructure charges levied by local government on property developers, which contribute toward essential services, being passed on to property buyers at a disproportionate rate, the research by Dr Lyndall Bryant, property economics lecturer and PhD researcher, found.
Dr Byrant found that for every $1 of infrastructure charge levied on property developers in Brisbane, house prices increased by an average of $3.95.
"In QLD the maximum infrastructure charge for a new three or more bedroom house was set at $28,000 in 2011," Dr Bryant said.
"My research found that the 'over-passing' ratio for new house prices is 469 per cent, and 356 per cent for existing houses. Applying the 2011 maximum infrastructure charge, this suggests the price of a new house increases by as much as $131,320 and the price of an existing house by $99,680.
"This means that this one government charge could add nearly $1,000 a month to the average 30-year mortgage."
The study analysed the impact of infrastructure charges on 27,752 house and 13,739 lot prices in Brisbane from 2005 to 2011.
According to Dr Bryant, the charges may be contributing to housing becoming unaffordable, as the increased price of new housing stock also affects the worth of existing properties.
"So infrastructure charges are levied at the time of developmental approval. Property developers claim it is uneconomical for them to pay these charges and pass them on to homebuyers, making new houses unaffordable for many," he said.
"As new housing becomes more expensive due to the charges being over-passed, it also drags up the price of existing housing in the area.”
Read more:
The other type of property investment
5 keys to successful property investment
Investors need to reconsider tenant expectations
