How will the ACT budget affect Canberra's commercial property sector?

Rates increases and stamp duty cuts for commercial properties detailed in the recent Barr budget have had a mixed reaction from sector experts.

Commercial rates increases will be about 6 per cent and stamp duty on properties valued at less than $1.5 million have been halved, but commentators are alive to the prospect of a shell and pea game with government charges.

Property Council of Australia ACT executive director Adina Cirson says 2017-18 will see the almost halving of commercial stamp duty this year and abolition next year for properties with a value of less than $1.5 million.

“This is a move in the right direction, despite the number of commercial transactions set to benefit is likely to be minimal,” she says.

“We will continue to make the point that tax reform must be revenue neutral and it is important that land rates don’t increase disproportionately to the decreases in stamp duty.”

Cirson says the rates changes shouldn’t be the government’s sole focus.

“We note the increased commercial rates charges are unchanged from those announced in last year’s budget – about 6 per cent for commercial sector,” she says.

“We continue to urge the government to get on with tax reform and abolition of stamp duty across the board.”

JLL’s local managing director Andrew Balzanelli says reducing stamp duty on sub $1,500,000 commercial sales is a positive step, but unlikely to have a big impact.

“It will have some benefits for strata-style accommodation within trade service area and mixed use developments,” he says.

“The most active sector in commercial sales will not benefit from any reduction in stamp duty under the current budget.”

Burgess Rawson ACT sales and leasing executive Mitchell Frail has also put the announcements under the microscope.

“While the stamp duty reduction is welcome, it’s interesting to assess its impact on the commercial landscape and investment activity,” he says.

“As stamp duty is a claimable tax deduction within the first year in the ACT, the short-term effect on current property owners will be minimal.”

He does hold concerns on the rate increases that he believes will impact investment activity.

“Increasing rates puts more pressure on tenants subject to net leases where they are responsible for outgoings, including rates,” he says.

Frail believes increasing rates and other imposed charges are contributing towards increasing vacancy rates in older assets.

“It makes it extremely difficult for those older assets to be renewed which help revitalise city centres and other areas with declining assets,” he says.