Tax and planning reform are among the key areas of opportunity for the property and construction industry in 2015, a leader within the sector says.
Property Council of Australia chief executive officer Ken Morrison said the sector is set for strong growth and will be a major contributing sector to an otherwise subdued economy, but added that the year presented significant opportunities for policy reform in areas which are holding the industry back.
The first of these is taxation; Morrison noted an annual tax bill of around $34 billion on real estate specific taxes alone makes the sector effectively the largest taxpayer in the country.
He said the Council is seeking the abolition of stamp duty as well as reform of land tax and developer charges.
“The federal government is signalling that 2015 will be a year of tax reform debate,” Morrison said. “We welcome that debate. The opportunity here is to have fundamental tax reform which lowers the burden on property but also addresses some of the most inefficient taxes in the government’s armoury which allows for greater economic growth.”
“There is no doubt that stamp duty is one of our most inefficient taxes that should be abolished. There are also inefficiencies with land tax which need to be addressed. Developer charges can have the effect of harming the growth that we are trying to encourage, so they are a very inefficient way of funding infrastructure.
“These are things which need to be on the government’s tax reform agenda and which the Property Council will be championing hard for throughout 2015.”
Morrison’s call for tax reform comes as the Property Council and other industry bodies have long argued that tax and other burdens on new residential construction are excessive. In 2011, for example, modelling by the Centre for International Economics prepared for the Housing Industry Association found that the combined value of stamp duty, infrastructure charges, council rates, water usage charges and land tax adds $66,270, 33,979 and $52,917 to the average development cost of greenfield sites in Sydney, Melbourne and Brisbane respectively and $48,470, $36,315 and $48,728 to the development cost of infill sites in each of those cities.
Outside of taxes, meanwhile, Morrison sees opportunities to improve planning systems – an area in which significant headway has been made in Queensland and Western Australia in recent years but not in New South Wales, where planned changes which the industry had long fought for were scaled back in 2013 amid difficulties on the part of that state’s government in terms of getting the relevant legislation through Parliament.
Morrison said more needs to be done not just in New South Wales but in ensuring that across the country, Australia has the most efficient processes possible so the industry can bring sufficient levels of housing supply to the market at the time that the market needs it.
“And unless we can do that, housing affordability will continue to be an ever impressing problem in Australia,” he said.
Morrison’s comments come amid a general period of optimism about the sector’s prospects in 2015. A survey of more than 1,900 industry leaders by the Property Council and ANZ last month showed that overall confidence in the sector was extremely high and that survey participants were particularly optimistic about prospects regarding forward work schedules and staffing as well as construction activity across a number of sectors.
Morrison said the importance of the sector to the overall economy cannot be understated.
“The Australian economy is in search of jobs and economic growth,” he said. “This is a sector which is growing and is a big slice of the economy already – 11.5 per cent of GDP employing 1.3 million Australians. It’s a big sector and it’s growing.
“When you look at the mining sector, the manufacturing sector, the retail sector – these are all declining or soft sectors. Property is the best game in town and the great hope for governments looking for industry to drive jobs and the economy.
“We are very politically and very economically important right now.”