ACT property values tempered by ACT land tax

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The median Canberra home price would have been $642,000 by now instead of the current $535,000, if not for ACT’s land tax policies.

This is the finding of a new report titled “The First Interval: Evaluating ACT’s Land Value Tax Transition”, which found that house price growth in Canberra has slowed dramatically since the land tax policy’s introduction in 2012.

Without the policy, the median Canberra home price would have been $642,000 instead of the current $535,000.

The average home loan in ACT has also only grown 9% to $364,000 – certainly below the 19% average in the rest of the country.

“The surprise was just how quickly it seems that everybody adjusted to it,” report author Cameron Murray told the Australian Financial Review.

“Within three years everybody’s adjusted, with prices reflecting the expectation of additional land tax obligation.”

Aside from making houses more affordable for those who are having trouble entering the property market, ACT’s land taxes also help the government raise revenue without pushing transaction costs and penalising economic activity.

The report further said that the ACT’s higher average income levels and economic equality have made it an easier market to impose changes. However, commercial property owners are having a much harder time.

“With price inflation very low, and asset values in this market falling, the effect of the tax transition is to amplify the poor financial conditions for owners of commercial property,” the report said.

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