Cairns to Lift Rates for Property Investors
The Cairns Regional Council has announced that they would be imposing a targeted increase in rates for property investors from the 2023-24 financial year of between 15 – 40%. This comes at a time of an incredibly tight rental market, and increasing costs already being faced by landlords.
This week we explore the changes announced, how this could impact the overall market, and what this could mean for investors in the region.
The Cairns property market has not performed as strongly as a number of other key markets on the east coast of Australia over the past 2 years, however with a rental vacancy rate of just 0.5%, as of September 2022, this is one of the tightest rental markets they have seen in over 20 years. This comes at a time of high inflation where the cost of living is already facing upward pressure, and the cash rate is being lifted by the RBA aggressively to combat inflation, which raises costs for property investors in the region and across the country.
It is typical to see an increase in council rates in line with inflation, or there is going to be a significant increase in the level of services and ultimately, returns’, provided to property owners. However, this increase is suggested to be in the range of 15 – 40%, which solely targets those properties that are not used by the owners as their primary residence, is both out of the cycle, and will likely only exacerbate the rental crisis tenants are already facing.
Rates are typically a deductible expense for property investors, providing that they are generating a rental income from their property, however, this increased cost will likely need to be passed onto tenants in the form of higher rental prices. The Council has also explored the idea of increasing rates to the owners of short-stay accommodation, such as Airbnb properties, however, they have not revealed exactly what the rate increases will be for each group.
Given the recently scrapped proposed changes to the Land Tax rules across Queensland, it would be understandable for investors to be looking at other states and territories for their next property investment. Over the past two years, we have seen 45.1% of investors dump at least one investment property in Queensland, which could mean a reduction of 30% of available homes for rent, and this was in a space of just two years.
This increase in rates may discourage tourism to the region, given a likely reduction in available properties for short-term stays, as well as reducing the availability of properties for long-term rental, which will reduce the overall amount of disposable cash in the region also.
For investors, it’s important to seek professional advice, and ensure that your portfolio and overall financial plan are well diversified to weather the ‘storm’ of policymakers throughout the various economic cycles.
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