King & Co proposes that the State/City Governments reduce their land taxes and rates to reflect the post flood economic realties

by admin | 17th February 2011

King & Co Property Consultants proposes the State/City Governments assist a business revival by announcing  an immediate, albeit temporary, reduction in land taxes and rates for those landlords or tenants impacted by the flood. Here’s why.

Many of Brisbane’s industrial areas are necessarily situated on flat land, with much of it close to the River and or creeks. All of the businesses in this category are subject to flooding, the degree of which depends on the severity of this condition.

The 2011 flood was about 1m lower at the City gauge than its 1974 counterpart, however in the Rocklea area the 2011 flood was 2m lower than 1974. None the less,parts of Rocklea’s industrial area, for example, went under by 3m to 5m.

These industrial suburbs will remain important economic areas because of their size, location, existing supportive infrastructure and their being close to or on the City’s arterial roads. Unfortunately,they will also  flood again as they cannot be made flood free and cannot be shifted. This begs the question: how can the owners and tenants of these properties be assisted by the authorities to weather the vagaries of nature over the short  and long term flooding cycles?  After all didn’t these same authorities approve the building of the properties in these areas?

More specifically,most properties affected, had no flood insurance coverage and will not be able to obtain any in the future. This means that landlords and tenants,depending on their lease conditions, have had to refurbish the premises at their own, considerable cost, as well as keep their businesses operating. Many will not be able to reopen and this will impact the landlord, the precinct and ultimately the economic well being of Brisbane.

According to economic  and real estate pundits the values of these properties will plummet and that these values may not recover for a number of years. This occurred in 1974 and will occur again. The impact on landlords, who are in debt with the banks, will be severe, particularly because the banks have already down valued properties, decreased LVRs, increased IRCs and  sought an increased equity from the owners due to the GFC. A further downwards revaluation will exacerbate the situation unless a positive intervention through the State Government occurs, one that also deals with the issue of insurance and long term planning.

The revenue raised from rates and land tax is based on the value of the unimproved value of the land. Except for the past two years, land values had increased substantially and the revenue from rates and land tax increased proportionately. Will the valuations be decreased in line with the instant land devaluations created by the flooding, or is there an unspoken ratchet clause which will prevent that for the sake of maintaining revenue, and that the relatively few industrial owners and tenants do not have sufficient voting power to worry our Politicians?

In other words, will the State/City Governments do the right thing by charging land taxes and rates that reflect flood related market devaluations, thereby giving much needed lifelines to the business community, or will they keep charging imposts that ignore the new realities and, therefore,break the backs of those trying to trade out of this blow?

Meanwhile, King & Co will be lobbying the appropriate authorities in relation to this proposal and would appreciate any support by those in agreement, including the press and peak bodies.

Phil Ainsworth
Managing Director

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