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March 29, 2021

What does the WA election mean for Perth property investors?

The Western Australia property market continues to be a vital component in the state’s economy. Even with the challenges presented by the COVID-19 pandemic, the sector has proven to be resilient.  

However, WA needs policy reforms to ensure the sustainability and prosperity of this critical economic driver. During the run-up to the recent state election, a survey conducted by REIWA found that property taxes and a shortage of rental properties were some of the more significant industry concerns. With Labor winning a second consecutive four-year term, they should focus their efforts on addressing the investment property market’s problems.


The benefits of a healthy rental market

The rental vacancy rate in Perth is the lowest it has been in 40 years. This shortage of suitable rental property means it is a great time to invest. However, without the right incentives, the lack of rental stock could negatively affect the housing economy. 

Investors are a vital component in maintaining a flourishing but fair rental market. High investment levels mean more choices for tenants. As there is more competition in the market, it translates to more affordable rentals. Conversely, a low occupancy and investment rate means fewer options for tenants and higher rentals.

As housing is a significant component of any household’s budget, higher rentals mean less disposable income. This factor then has a knock-on effect on the rest of the state’s economy. 


Legislative reforms are needed

The rental moratorium that ends on the 28th March 2021 hurt property investment. With potential investors shying away from any asset that might not provide an immediate yield, the WA government needs to implement incentives to revitalise the market.

As other WA property industry members recommend, the market needs both short and longer-term government-driven initiatives.


Short-term tax incentives

In the short-term, the WA Government should look to introduce incentives that can act as a catalyst and revive the property investment market.

One of the recommendations tabled by industry leaders is a land tax rebate. In Western Australia, land tax is payable on all land except the land you use as your primary residence. As this tax relates to investment properties directly, overhauling the relevant legislation will attract investors to the WA property market.

The WA state government’s budget is by no means in dire straits, so there is no issue with affordability. In fact, the opposite is more accurate as it still reported a healthy surplus of $1.2 billion despite the unplanned reduction in revenue and additional expenditure in the challenging 2020-21 fiscal year.

Another taxation system that may need some tweaking or outright repeal is stamp duty. Currently, the WA Government is taxing investors twice for every property purchase – land tax and stamp duty. Foreign purchasers also need to pay an additional 7% which creates a further disincentive to invest in the WA property market.

Nevertheless, the WA government’s recent action in refining stamp duty is a step in the right direction. Currently, buyers enjoy a 75 per cent stamp duty rebate for off-the-plan apartments. However, this temporary incentive needs to become a permanent fixture of WA’s property tax system. The rebate could further stimulate investment if the government reintroduces it for residential apartment properties under construction. With this rebate set to expire in October 2021, the WA state government needs to consider the ramifications should it not make it permanent legislation. 

As the COVID-19 rental moratorium has negatively affected property investment sentiment in the short term, introducing these incentives can boost confidence and strengthen the industry moving forward.


Longer-term legislative reforms

In addition to the short-term tax incentives mentioned to boost investor confidence in the WA property market, the WA state government needs to reconsider some of its current property-related legislation. For example, any amendments to the Residential Tenancy Act need to consider both the tenant and the landlord’s rights and obligations. Should the government fundamentally shift the balance in the tenant’s favour, it could detract potential investors who would instead put their money in a less restrictive asset class.


With Labor winning a second term, will it be more of the same?

Labor’s victory in the recent election has confirmed that citizens in Western Australia are confident in the governing party. With the landslide victory representing the most significant win in any Australian jurisdiction in 70 years, the WA government’s confidence levels should be at a record high. 

Although many analysts believe Premier Mark McGowan’s management of the COVID-19 crisis created this record-breaking result, Labor made significant policy promises during the election campaign.

These promises included $100 million for business and industry to attract new investment into WA projects, particularly local manufacturing and new technologies. There is also a commitment to deliver 125,000 new jobs in the next five years.

As growth is a clear strategic objective for the WA government, they need to pay attention to the services that support it. With a record-low rental property vacancy rate, the state needs both short and longer-term investment incentives. If it is sustainable growth the state needs, it will have to look at ways to make the economy an attractive investment. 

Overhauling the property tax system and reforming tenancy legislation to balance landlord and tenant needs is vital. Without these initiatives, the property market’s current state will make any investment into other government initiatives impractical. With a shortage of rental properties and more people moving to WA, skyrocketing rent will put a damper on Labor’s growth plans.


HERE to help 

If you’re considering an investment property in 2021, we’re HERE to support you along the way.

Contact the HERE team to discuss how we can help you maximise your property’s potential while minimising risk with a tailored approach focused on your goals.

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