Column from developer Theo Onisforou
Those of us who own land and rent it out to others, for them to use and make a profit from, have always been known as ‘landlords’.
But while ownership of land might have once conferred a lord-like distinction, exalted the holder in the eyes of society and conferred great riches, today, increasingly, it’s something that comes with great costs.
Owning land no longer automatically makes you rich. Instead, it’s a constant battle to make it provide any return at all. Landlord? More land pauper, yet still they’re a class subject to increasing levels of abuse from Federal, State and local governments, as well as the majority of the non-land-owning public.
Look at bricks and mortar retail land ownership. The State Government continually increases land values for Land Tax purposes, at the same time making them ever more difficult to challenge. It clearly does not realise — or care — that there’s been a epic move to online retail, leaving bricks and mortar to return less than ever before.
Take Sydney’s Oxford Street, for example, weaving its way from the city through the former vibrant suburbs of Darlinghurst and Paddington. Despite the efforts of the Woollahra and City of Sydney councils who established Oxford Street Working Parties to help salvage some retail, the street is today regrettably a mere shadow of its former self.
Every landowner, land-seller and real estate agent active in bricks and mortar retail in the area is well aware of the actual fall in property values over the last 10 years – but the NSW Government’s land value assessors seem totally oblivious. They have not reduced Oxford Street retail property land values at all.
Firstly, I’d like to see the State Government forced to use independent, arm’s length outside valuers, those very same valuers that our banks and the public use when needing to determine proper and unbiased third-party land values. Every year l tabulate the land tax percentage of the gross rent achieved from my retail properties. Every year, it goes down. But at the same time, the tax I pay goes up.
Over the last calendar year, that added up to about two months of my annual gross rent. This Covid-19 year, it’s likely to be four to five months of my gross rent. I worry that the NSW Government could soon earn more “gross” income from my property than I do. Surely, I think, it is time the State Government was disclosed on my Certificate of Title as a co-owner?
Alternatively, maybe the NSW Government should dismiss its whole internal valuation team and its whole land tax collection infrastructure, and simply take a fair proportion of a landlord’s annual gross rental revenue via our annual Income Tax returns. This could achieve a proper decrease in Land Tax for individuals unable to lease their properties.
Meanwhile, my local council also annually taxes me as part of its revenue-raising. While that’s obviously necessary, its assessment criteria is again based on the same shaky premise — 50% on the NSW Government Land Tax Valuation system.
And if it’s not enough being hounded by those two bodies, now the Federal Government has entered the fray, telling me how to conduct my retail rent business negotiations with my tenants.
In other words, the Government has decided that a “free market system” will no longer work effectively and that we landowners must do as they say because we are obviously clueless and do not realise that destroying our tenants’ long-term business prospects would harm us too.
Instead, they’ve drawn up their own raft of senseless rules. But how can landlords and tenants ‘share proportionally’ when, in my case, all of my outgoings continue and the tenant is allowed to hibernate rent-free? If only I could similarly hibernate my statutory and other outgoings!
And would it be too much to hope for that the State valuers realise, and react to, the negative impact this measure will have on long term land valuations for Land Tax? Yes, I think so.
This plea for fairness come too at a time when the majority of experts believe that COVID-19 will have the long-term consequence of pushing even more shoppers to online retail. Bricks and mortar may increasingly be used merely as showrooms for shoppers to inspect goods; in other words, a webpage for business.
Next, I’d suggest, we be allowed to return to a free market system as soon as possible because so much of this red tape and unnecessary regulations distort the way in which we can run an efficient business.
For example, I am currently building a block of apartments in Sydney’s inner west, in St Peters. The building fronts both the Princess Highway and Barwon Park Road and I have been forced by my local council to construct street level retail on both street frontages despite there being almost zero demand for shops in that location.
A more stupid Government requirement could not exist. While bricks and mortar retail is under huge threat from online shopping, it’s being decimated in homogenous “passer-by” only locations. So why continue to mandatorily require retail when the amenity of such highway frontages is zero?
It only serves to create a conga line of unattractive and permanent FOR LEASE signage for passers-by.
So let’s forget about mandatory ground-floor high street retail when the only bricks and mortar retail that will survive will be that in unique and special locations. Allow developers the choice of retail or residential use on the ground floor; their decisions will best reflect true demand.
Sadly, I imagine I’ll be paying land tax on the retail component of St Peters for the next five to ten years against zero rent revenue.
Spare a thought, then, for the so-called ‘landlords’. Most commercial owners are not wealthy people, they are simply people who purchased property for their retirement, thereby alleviating a need for a Government pension.
So, finally, let’s ban the use of the word ‘landlord’. And maybe substitute it for lessor – because we shell out so much, but continue to receive less every time.
