Special Report: Rising short stay rates won’t solve housing problems

By Grantlee Kieza, Industry Reporter

A decision by the Brisbane City Council to increase rates for short-stay properties will not help the current housing crisis “one jot”, nor damage management rights according to ARAMA CEO Trevor Rawnsley.

With the city mired in a chronic shortage of rental properties, Brisbane lord mayor, Adrian Schrinner, said increased rates on short-stay properties would provide an incentive to landlords to rent their property to longer term tenants. Landlords who rent out their entire property for longer than 60 days a year will now pay 50 percent more in rates. Mr Schrinner said the rate increase would mean a property on Brisbane’s minimum rating category would pay $600 extra a year. Handing down the city’s $4billion budget the LNP lord mayor said a new “transitory accommodation” category would help tackle housing availability and aff ordability in Australia’s fastest growing capital city. Mr Rawnsley said the decision would have “some impact” on buildings used for shortstay accommodation but not much and was more about “Brisbane City Council’s way of trying to dress up a new tax and to make it sound like they’re saving the world.” “They’re trying to make a silk purse out of sow’s ear,” Mr Rawnsley said. “In our opinion the rate rise is not going to make a jot of diff erence to housing aff ordability, it’s not going to suddenly push people out of short-term rentals into long term tenancy. “What it will do is deliver a fi nancial windfall for Brisbane City Council in the same way that other councils have discovered over the years that they can apply a levy. For the last 15 years, the Gold Coast City Council has applied a levy to all short-term lett ing and that money goes to promote Destination Gold Coast.

“This is not a new thing. “I think Brisbane City Council has just discovered that while Brisbane is not exactly a mass tourism destination, they need to do something that looks like they’re responding to housing aff ordability and shortage of long-term rentals. “Ultimately what it means is that with an average occupancy of 65 percent it’s going to cause an increase in tariff of less than $2 a night, so investor-owners will need to decide whether they ask their agent which is our guys, the management rights operators, whether they increase the tariff by a couple of bucks a night or will they get a bett er return if they converted the property from a short stay to long-term rental. “I think most people will just whack up another couple of bucks a night and no one will ever know.”

“The punter will pay the extra tariff and the council will get their extra tax. Brisbane City Council is under the pump with fl oods, they are enormously out of pocket, and they do a prett y good job.”

Mr Rawnsley said while he would never be a cheerleader for new taxes or more taxes, this one was not going to hurt much. “What I don’t like, though, is people piling on to the antishort-stay section by saying things like Airbnb and other management rights are bad for housing aff ordability,” he said. “Brisbane City Council’s internal marketing has spun it in such a way that this new rate rise is going to save the planet.

The rate rise is not going to make a jot of diff erence to housing aff ordability

“But you scratch the surface, and you fi nd that $2 a night is not really going to make that much of a diff erence. If investor owners are making good money out of Airbnb. Ultimately the market will decide whether Airbnb is a success, not Brisbane City Council. “The market will decide whether they book Airbnb or if the rates are too high, and the investor market will decide whether they’re bett er off gett ing a return on long term stays instead of short-term lett ing. Ultimately the market always decides. And it should decide. That’s what capitalism is all about.”

Management rights executive Mike O’Farrell, the Chairman of MLR Services and a Life Member of ARAMA agreed that the council’s decision was “another tax that will be passed onto consumers. One needs to remember,” Mr O’Farrell said, “that the Gold Coast and Noosa LGAs have been charging a short-term lett ing tax for some time. “The BCC is playing catch up. “It’s disappointing that governing bodies fi nd litt le parts of the economy to tax rather than look at the total picture and adopt real tax reform across the board. As management rights operators we should be concerned as I wouldn’t expect the tax on Airbnb to not spread to other short-term lett ings in Brisbane City Council LGA.”

Management rights lawyer John Mahoney said while a rate rise had the potential to deter people who would otherwise be happy to put their units in a manager’s short-term lett ing pool, it was “unlikely to have any material detriment to the industry.” “I think if you work out what the increase might be and spread it across 12 months it’s not a lot of money per night. While it does have the potential to make an impact, I think the impact will be minimal. I don’t think it will help the rental crisis at all. It will result in the council gett ing more money, but I think it will have negligible if any impact on making more properties available for more tenants.”

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Kelley Rigby, from Management Letting Rights Consultancy company Letts Rebuild, agreed, saying that while councils often did things to ruffle feathers the potential rate rise was not going to make much of a difference though it might persuade a few owners to put their short stay properties into the long-term rental pool. Mr Schrinner told the Guardian website that he hoped it would be more than a few properties. Brisbane’s rental vacancy rate was 0.7 percent in May, according to SQM Research. “There’s a serious housing affordability issue and we need to be looking at new ways to increase housing supply,” Mr Schrinner said. “It’s about getting more accommodation for renters to be available in that long-term rental market. Every single property that switches from short-term to long-term rental is a win for the community.” Mr Schrinner said residential rates would increase by 4.93 percent, the city’s highest rates increase in more than a decade, as Brisbane grapples with the aftermath of February’s floods. From July 1, property owners who list their homes on Airbnb, Booking.com and Stayz will be asked to self-identify and be charged higher rates. The charges will only apply to entire properties, not single rooms or granny flats, and only to those rented out on short-term leases for more than 60 days a year. He said council would use online resources to identify properties listed as shortterm accommodation and allow people to report their neighbours. Property taxes are being reshaped in other areas. Earlier this year, Noosa shire council introduced a $950 registration fee for short-term accommodation properties, while the New South Wales government approved a request for a 90-day-a-year cap on short-term rentals in Byron Bay. Starting in 2023, some first home buyers in NSW will be able to choose between paying a stamp duty lump sum or an annual land tax instead.

Under the plan first home buyers purchasing a property up to $1.5m can opt to pay an annual fee of $400 plus 0.3 percent of the land value. Buying a $1.35m house, with a land value of $810,000, the stamp duty would be $59,125. But if a buyer is holding on to the property for less than 20 years, they are better off paying the $2,830-per-year land tax, which would total $56,600.

NSW will become the second Australian jurisdiction to change stamp duty laws, with the ACT halfway through a 20-year switchover. But rather than solve a housing crisis, Mr Rawnsley said the scrapping of stamp duty would most likely only result in higher prices with the same result if the plan was adopted in Queensland. He speculated that an end to stamp duty would only put more money in to the pockets of potential buyers allowing them to spend more. And he warned Queensland treasury officials to beware of tampering with the tax model in the management rights field. “In Queensland, the sale and purchase of management rights generates more than $150 million a year for the Queensland state government in stamp duty,” Mr Rawnsley said. “What the NSW government is doing, in changing that tax model will be advantageous for the management rights business because new owners won’t have to pay stamp duty when they buy a management rights business. But a government is never going to stop the taxability of things and ultimately someone ends up paying. “When the Queensland government realises how much is at stake to its coffers in stamp duty, treasury officials would be very nervous about doing anything to harm that $150 million. There are a lot more management rights in Queensland than in NSW, so the amount of stamp duty generated by those businesses in NSW is significantly less. “In the short term the removal of stamp duty would be a good thing in Queensland for people who are buying and selling management rights, but it would not necessarily be good for the government. So, they have a much more complex conundrum in Queensland then they do with management rights in NSW.” John Mahoney also doubts that the elimination of stamp duty would get more people into their own properties “because any savings on duty is going to be offset by the increase in the price of property. “The people who are trying to get into the marketplace at the lower end are already getting all kinds of concessions so it’s not as though the duty is a big impost on them,” Mr Mahoney said. “If you are buying a property for $2 million then it’s going to cost you close to $100,000 in stamp duty so it’s that upper middle range that would benefit from removing it. “I still think that the removal of stamp duty would increase the price of properties and I can’t see it helping get more people into their own homes.” Mike O’Farrell said he supported any move to remove stamp duty but did not support “raising revenue through taxes to support the levels of government we have in this country”. “I seem to recall that the introduction of GST was to mean state governments would be dropping Stamp Duty,” Mr O’Farrell said. “Well, that didn’t occur. Now we are seeing State Governments still taxing land-buying and landowning citizens and as time moves on it will be called by another name. It’s still tax.

“It’s a crying shame that a country such as Australia has the levels of government we do; it’s duplication and red tape at the highest level. Wouldn’t it be lovely to have that ‘magic pen’ and with that we could reform government and the tax systems that go with it?”

ResortBrokers celebrates

Best year in business in four decades with $385 million worth of sales

Australia’s longest established and most experienced specialist agency in the accommodation and hospitality sector notched up a record $385 million in sales last year – a record for the 37-yearold company.

ResortBrokers, which boasts brokers in every Australian state and territory, is celebrating a 43 per cent increase in sales for the 21/22 FY.

Other key statistics include listings up 21 per cent; enquiry up 14 per cent; and inspections up 10 per cent.

ResortBrokers Managing Director Trudy Crooks cites an increased desire in a post-COVID world by buyers wanting to run their own business and be their own boss, as one of the major reasons behind the increase. “The accommodation industry still represents good value as other asset types have tightened,” she says. “We are across the country with lots of feet on the ground – we have 30 brokers around the nation – and as focus continues on the regions we possess that local knowledge to help buyers and sellers. “There are also lots of commercial players – the big groups and hotel brands – buying up accommodation around the country which is driving demand.”

Ms Crooks says FY22/23 looks even more promising. “We will see more of the same excellent results,” she says. “There is still a lot of pent up activity with demand for properties in places like the Gold Coast at an all-time high. “At the same time, the regions will continue to stay strong.”

ResortBrokers’ Management Rights Report 2022

Management Rights’ industry worth $4.8B in Australia, according to groundbreaking report, with $120B of accommodation assets under management.

ResortBrokers recently (July 22nd) released the Management Rights’ Report 2022 – the fi rst over-arching industry report of its kind. ResortBrokers utilised its bespoke data collection system and new in-house ResortBrokers utilised its bespoke data collection system and new in-house research department (ResortBrokers Research - headed by our Property Economist Josh Mangleson), to collect, collate and analyse the data. Key trends to emerge over the past fi ve years include: • Multipliers have increased signifi cantly particularly for medium-to-high nett ing MR assets • Many developers have opted to establish MRs as “business only” assets Many developers have opted to establish MRs as “business only” assets • Off -The-Plan opportunities have become the most sought-aft er MR type Off -The-Plan opportunities have become the most sought-aft er MR type • An increase in high-net-worth private operators, syndicates and private equity competing for the best and biggest MRs • Transactions are taking considerably longer than previously • COVID-19 has had almost zero eff ect on permanent residential MRs but short-stay MRs have been aff ected depending on region To receive your copy today please visit htt ps://www.resortbrokers.com.au/mr-report/ To receive your copy today please visit htt ps://www.resortbrokers.com.au/mr-report/