RESIDENTIAL property developers and builders were big winners from state and federal budget initiatives, which will provide much-needed stimulus to the property industry. At a state level, the government announced major reforms to land tax, placing a 50 per cent cap on land tax valuation growth and the re-introduction of developer concessions. From 2009-10, a 50 per cent cap on growth in land values will apply for the purposes of assessing land tax and the metropolitan region improvement tax. Also from 2009-10, property developers will benefit from a re-introduction of a land tax concession, allowing them to pay land tax on the lower undeveloped value of land holdings, rather than the full subdivided value of lots, for one year after the creation of lots. The abolition of the concession by the Labor government in 2003 led to a distortion in the supply of new lots, with developers holding off on releasing lots in the months leading up to June 30 to avoid tax obligations. Lot creation would then sharply rebound throughout July and August, leading to bottlenecks in the approvals process for relevant state government agencies and local government. Urban Development Institute of Australia WA chief executive Debra Goostrey said while both initiatives were positive for the industry, there was more scope for relief. She said while the 50 per cent cap would help minimise dramatic increases in land tax from year to year, the tax scales needed to be reviewed to address bracket creep. "Currently, the land tax scales increase at an exponential rate, with the higher the value of land you hold, the higher tax bracket you fall into," Ms Goostrey said. She said that, based on 2008-09 rates, owners of land valued at $5.5 million or more would be taxed 1.46 cents for each dollar in excess of that $5.5 million. Owners of land valued at $11 million or more are taxed 2.16 cents for each dollar in excess of $11 million. "A flatter scale for the determination of tax liability should be introduced to ensure that landowners are not penalised for investing in the growth of our state. Investment in property is key to increasing the amount of much needed affordable rental properties available across WA," Ms Goostrey said. At a federal level, the extension of the first homeowners boost - to $21,000 available for new homes and $14,000 for existing homes - was a major win for the industry. The government will retain the current boost until September, with a reduced amount available for the three months to December. The extension falls short of the industry's call for the boost to carry through until the end of the calendar year before being reduced for the following six months. Cedar Woods Properties managing director Paul Sadleir said despite this the extension of the grant was preferable to a cut off at June 30. He said strong activity in the first homebuyer market would eventually flow on to the second and third homebuyer market and, together with lower interest rates, would restore confidence in the sector. "The grant is a very good measure to allow the industry to settle down and hopefully get through to the second home buyer market," Mr Sadleir said. Master Builders Association of WA housing director Gavan Forster said the state and federal budgets revolved around similar themes, with both containing major capital works spending and a focus on the construction industry as a key source of job creation and maintenance He said it was now vital that projects were delivered in a timely manner. "We don't want the old political trick, announce something four of five times before it actually gets going. We need to get things through the approvals processes and generate the work," Mr Forster said. Redink Homes managing director Scott Park said the government's commitment to major projects and capital works spending would underscore job security. "Interest rates are good, land is affordable, the only underlying uncertainty is around employment security," he said. "Anything that strengthens employment is a good thing for the [building] industry."
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