Investors will turn attention to Adelaide following stamp duty removal, says Colliers International
The abolition of stamp duty on commercial property, as announced by the South Australia government last week, will open up opportunities for buyers and vendors alike, according to Colliers International.
Ian Thomas, Colliers International Director of Capital Markets in Adelaide, said the move would increase the profile of South Australia in investment circles and provide a competitive advantage to those doing business in South Australia.
“This is a very positive step that will make the South Australian market highly attractive on a national level,” Mr Thomas said.
“It will build on the momentum the South Australian market has experienced over the past 18 months, whereby institutions have re-entered the market and investors have generally begun to look more closely at South Australia as the eastern seaboard market becomes increasingly competitive.
“This presents a tangible opportunity for investment in Adelaide. As a market, Adelaide represents great value, offering higher yields and lower rates per square metre of improvements. Investors are beginning to look outside the eastern states and Adelaide is on their radar.
“With this announcement on the removal of stamp duty on commercial property, in a market that already shows value when compared to markets such as Sydney and Melbourne, this is just another string in the bow in terms of attracting investment into South Australia.
“Australian institutions are well positioned to capture the greatest anticipated uplift, jumping into the cycle early when there is less competition, stable market fundamentals and no sign of a construction oversupply."
Mr Thomas said the buyer pool had deepened over the past 18 months to date, with institutional and private investors both being active in the market.
“Institutional investors have recapitalised over the last few years and are looking to invest these funds into the Adelaide commercial property market, while private investors are looking for higher returns than in the share or cash markets,” he said. “The key issue during 2015 is going to be the availability of stock for sale."
John Marasco, Colliers International Managing Director of Capital Markets & Investment Services, said South Australia would experience a competitive advantage as investment appeal increased across all purchaser profiles.
“This move will catch the attention of not only Australian institutions but also private investors, syndicates, superannuation funds and individuals purchasing through their SMSFs,” Mr Marasco said.
“We are likely to see an increase in competitive tension translating to property values."
Mr Thomas said the effects were likely to be far-reaching and seen across the commercial sector, from institutional grade buildings to suburban assets purchased through SMSFs across the office, retail and industrial sectors.
“This move by the state government will allow South Australia to be a real competitor on the world stage,” Mr Thomas said. “On another level, the removal of stamp duty will also provide an opportunity for local business owners to buy their property.
“South Australia has traditionally been one of the most expensive states in Australia in terms of the percentage of a commercial property transaction expenses that had to be paid to the government. Taking that out of the transaction equation will undoubtedly open up more opportunities for all."
Mr Thomas said while the complete removal of stamp duty was not due to come into effect until 2018, the government’s plan to stage the removal by thirds would balance out any concerns from a stock supply perspective.
“The staging of the tax removal by thirds will go a long way to balancing the benefits over the three year period,” he said. “When savings come through it will be a win for vendors and buyers alike.”