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Katy kicks back on change of use charges.

By johnboy - 28 April 2011 3

Yesterday we had scrapping between the Greens and Liberals on change of use charges.

If you haven’t been following the issue it comes down to this.

When a developer buys a lease (remember there’s no freehold here) to land in the ACT currently in use as a house they need to apply to change that use so they can build apartments.

Let’s say they buy an inner north block for $800,000, but can get 12 one bedroom apartments on it for $400,000 each. That’s a fair bit of a windfall thanks to the Government, which has been proposing taking a slice of that cash. It’s not all free money, the buildings have to get built, there are finance fees, and no small amount of risk. But with our bubble inflated land prices there’s still a lot of cream.

The Liberals’ Zed Seselja is worried increased costs will be passed on to purchasers, which ignores that purchasing is limited now pretty much entirely by what banks are willing to lend, not what the punters are willing to pay.

Katy asks why the community (by which she means government, but we do pay the bills in the end) should miss out on a share of this money.

“Is Mr Seselja really arguing that a portion of the additional money gained from granting these extra development rights should remain with the developer and not be returned to the community?”

“The Government is currently ensuring that the law as it stands applies. After several years of a flat fee arrangement which saw the community miss out on approximately $20million per annum in Change of Use Charge payments, the government has had no alternative but to apply the law as it was always intended when passed by the Legislative Assembly. Is Mr Seselja arguing that the government should ignore the law?” Ms Gallagher said.

“The Canberra Liberals have been caught napping on this issue. They have missed two years of consultation with property industry stakeholders; they have clearly not read the reports available on the Treasury website, and they continue to show they don’t understand how the Change of Use Charge operates or if they do understand it – they no longer support it.”

“The property sector have lived with this charge for 40 years, and there is no evidence over that time that the charge has added to the cost of property, to the price of multi-dwelling developments or to rents. If Mr Seselja’s argument that Change of Use Charge significantly influences property prices were true why didn’t property prices fall commensurate with the low charges that were applied prior to rectification of the system last year?”

What’s Your opinion?


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3 Responses to
Katy kicks back on change of use charges.
Mr Lubberlubber 11:11 pm 28 Apr 11

georgesgenitals said :

There’s not always as much profit, percentage-wise, as you’d think. Financing is often impossible if you can’t demonstrate 20% profit on the deal.

Hopefully a sensible balance can be struck between encouraging development and the govt getting a reasonable cut.

+1

The big problem with all of this is that it is simply an added cost to development. What it means is that a developer can no longer pay what he/she would have paid you for your property before, unless prices go up. In these post-GFC times, the banks won’t give them the money otherwise. So either prices for the finished product goes up (bad for people looking to get into the market, good for existing owners) or the price of existing properties goes down (good for buyers, bad for existing owners).

The stamp duty on the transactions is still the real money spinner for the Government even if they received 100% of their forecast change of use charge take. Kill the transaction flow and you kill the whole cashflow. That’s the fine line that it looks like they might be overstepping.

You have to feel for the person who owns the house next door to a block of units in a development zone. Their old neighbour made money cashing out to a developer who built a block of flats next door to them. Now no developer will touch their block for anything near what their neighbour got.

georgesgenitals 6:36 pm 28 Apr 11

There’s not always as much profit, percentage-wise, as you’d think. Financing is often impossible if you can’t demonstrate 20% profit on the deal.

Hopefully a sensible balance can be struck between encouraging development and the govt getting a reasonable cut.

colourful sydney rac 4:37 pm 28 Apr 11

sounds sensible enough.

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