Investors across Cairns received an unwelcome surprise in the mail recently, with Council flagging that come next financial year, non-principal places of residence will attract an additional increase of 15-40% on top of the already slated rises due across the board.
Council has referenced other regions which already distinguish between owner occupied and investor owned properties, with higher rates applying to the latter, however initial responses have been less than favourable as investors that have been hit with doubling interest rates and higher costs of living (insurance, property maintenance and repairs etc.) see yet another disincentive to choose to put their money in property.
I think we can all appreciate that local Councils have a lot of costs, and the prices they pay for goods and services has gone up the same as it has for everyone else – and ultimately those costs have to be passed on somehow, to someone. Viewed objectively, it might seem that if one segment of the rate base has to be raised, then better for it to be those that can at least claim the cost against their income, than applying it across the board to every first home buyer and retiree alike. The fact that a similar system exists elsewhere also serves as justification – “this is normal in XYZ, its only fair to apply it here”.
However, in the context of vacancy rates at half a percent, rent rises at their fastest in years and tenants with long rental histories winding up in hotels, in their cars or flat out in tents, the choice to add an extra impost to those that provide the majority of housing for tenants is potentially poorly timed to say the least. At a minimum, council can almost guarantee the increase in rates will be passed on (when permissible) via higher rental prices. At worst, more owners may exit the market. While potentially homes sold could go to other investors, owner occupiers are more likely in the current environment, and time on market is likely to mean time vacant, and another family looking for alternate accommodation.
With time up their sleeves, there may yet be a change of heart (and policy) from Council, with some moves already made to clarify the level of increase planned. Alternatively it might end up more targeted still – focusing on homes that have been put to short term accommodation rather than long term rental. One thing is for sure though – owners are unlikely to take this one quietly.