Tax incentives on offer for BTR in Queensland 

• A reduction in land tax of up to 50% for up to 20 years for BTR developments which feature at least 10% of rental homes as affordable housing;
• A full exemption for the 2% foreign investor land tax surcharge for up to 20 years; and
• A full exemption from Additional Foreign Acquirer Duty (AFAD) for the future transfer of BTR sites.

(KPMG, 2023)

It’s clear we are seeing a structural shift in the way the institutional market meets the housing and accommodation needs of a rapidly rising population in a time of unique and paralysing supply side constraints. As the natural supply vs demand equation Queensland’s housing market has enjoyed for years is artificially altered by the minefield of manufacturing and logistical constraints, traditional accommodation models are quickly being reconsidered by our largest developers.

Being the biggest recipient of net migration since 2021, the shortage in affordable accommodation has hit the Queensland market particularly hard. Given we don’t have the infrastructure to sprawl, our next move is to go for density via the wildly popular BTR model, but with a housing shortage of these proportions, social and affordable housing sites close to employment and transport hubs are rare and expensive. The private sector is in control of the vast majority of sites that would be considered appropriate for Affordable Housing, hence a collaborative approach is needed to cater to the immense pent-up demand of residential tenants. 

“Overall, there are approximately 150,000 households across Queensland whose needs for affordable housing are currently unmet – that is, they are either homeless by ABS Census definitions or otherwise low-income recipients living in private rental housing and paying more than 30 per cent of household income in rent”

(UNSW, 2023)

To encourage developers to allocate a portion of their developments to affordable housing, the government offers a myriad of tax incentives to make these developments more financially feasible in a market that would otherwise encourage them to produce a development that would deliver the highest margin. These incentives are geared towards inviting further cooperation from the private sector in tackling the housing shortage.

From a developer’s perspective, affordable housing is the scheme in which the government pays a portion of the tenants rent so that the tenant has access to reliable, quality accommodation at a discounted rate. Determining the definition of affordable housing is “not a precise exercise, as in Australia it doesn’t have a common meaning across jurisdictions and government programs.” (AHURI, 2023)

The wall of capital wanting to deploy funds into the accommodation space is unprecedented and is providing institutional investors with diversification into a sector otherwise unexplored in the Australian market. The State Government’s incentive schemes are bridging the gap between much needed institutional investment funding and the developers on the ground who are trying to make projects financially feasible, whilst at the same time providing a solution for the widespread shortage in affordable accommodation. The next step is to further clarify what is deemed “affordable housing” so that developers can more accurately evaluate their projects. 

For further information contact:

Hugh Menck MRICS

Head of Capital Transactions

hmenck@bne.mcgees.com.au 

+61432560589

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