Insights from BDO’s ‘business of property’ lunch, Melbourne

02 July 2015

“Four times as many residential dwellings are expected to appear in Melbourne than Sydney over the next four years” was one of the key insights delivered by keynote speaker Nerida Conisbee, National Director of Research, Colliers Australia, at BDO’s recent Business of Property lunch in Melbourne.

In the residential property sector, a significant proportion of market growth is concentrated in Melbourne and Sydney. Melbourne’s apartment development pipeline in the CBD for the 2014-2019 period is currently forecast at 19,031, compared to 5,325 new apartments in Sydney’s pipeline. Low interest rates are fuelling investor activity, even with APRA regulations attempting to ease price growth.

The Multi-unit Apartment and Townhouse Construction industry has grown 9.2% every year for the past five years. This is expected to curb to less than 1% over the next five years.1 Whilst this may not account for outliers like the Melbourne CBD, we may expect relative saturation in supply of new apartments across the country.

In the commercial sector, IT and Business Services are the biggest drivers for commercial rent with smaller floor space requirements becoming the norm in the market.

Migration into Australia has started to decline since FY14, however, the majority of overseas migration is concentrated in Melbourne and Sydney – VIC and NSW accounted for over 60% of total overseas migration in FY14. Melbourne has also seen the largest number of interstate migration in FY14, compared to other states.

During BDO’s Business of Property lunch, BDO Tax Partner and member of the Board of Taxation, Mark Pizzacalla, explored some of the key themes emerging from public submissions to the Board in relation to proposed Australian taxation reform (the cut off for public submissions is 24 July 2015).

  • Income, labour and payroll taxes constitute the most significant proportion of the Federal Government’s income. For State Governments, property taxes constitute the majority of its collections.
  • Bracket creep is a topical issue due to the projected increase in government collections (increase of 2% of GDP over the next four years). Personal Income Taxes currently constitute around 50% of all government taxes and will continue to increase as average incomes increase. This has been a trend since the 1950s when Personal Income Tax accounted for 40% of total taxation.
  • Reform discussions around property issues include:
    • Broadening and increasing the GST
    • Considerations of negative gearing and the applicability of the 50% capital gains tax discount
    • Harmonisation of state taxes and the removal of inefficient taxes such as Stamp Duty.
  • South Australia is the first state in Australia to opt to abolish Stamp Duty by 2018 which is viewed as a step in the right direction. A recent BDO Survey further found that around 62% of SMEs in South Australia are in favour of increasing the GST, highlighting that the concept of reducing overall state taxation in favour of increasing the GST is a real option for business.

1 According to IBISWorld data