Tax breaks set to turn up heat in SA market

South Australia’s commercial property market is set to heat up with new legislation likely to make it the nation’s most competitive.

The second phase of the State Government’s stamp duty reform will be rolled out from July 1 – a move expected to slash transaction costs and encourage greater investment.

The cuts started in January last year and will culminate in stamp duty being completely abolished for commercial property by July next year.

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But global real estate giant Colliers International says the initiative isn’t without a glitch. Its latest Radar research report has revealed the pending cut has actually stalled the commercial property market in the first half of this year.

Colliers director of investments services, Oliver Totani, says while the savings that could be made are substantial, buyers appeared to be holding off.

We are currently holding several assets back from the market so we can ensure buyers have no risk in receiving the cost savings

“We are seeing increased inquiry in the Adelaide market from a range of investors but many are holding off on committing until post June 30, when the next step down in stamp duty becomes effective,’’ he says.

But Totani says there are still savings to be made in the current climate.

“For each $1 million investment made, the savings will be $18,125 post July 1.”

The current sales climate for properties more than $5 million has seen $111 million of assets change hands in the six months to June 2017, compared to $523 million in the second half of 2016 and $229 million in the six months prior.

“We are currently holding several assets back from the market so we can ensure buyers have no risk in receiving the cost savings,” Totani says.

There is growing interest from institutional, offshore and eastern-seaboard investors looking for yield margins

Colliers International associate director for research, Kate Gray, says an increase in activity is expected for the second half of the year.

“We expect there to be a similar trend in the lead up to the next cut in stamp duty, with purchasers holding off on decisions until July 2018.’’

Gray says the savings are about $18,000 per $1 million dollars spent at each interval of reforms, generating significant incentive to wait until the cuts are effective.

“That said, although there is an incentive for purchasers to wait, the increase in the buyer pool post the cut could push property prices up,” she says.

Totani says the Adelaide commercial property market offers exceptional value for investors when compared to Sydney and Melbourne.

“There is growing interest from institutional, offshore and eastern-seaboard investors looking for yield margins and we expect this reduction in transaction costs will provide further assistance in widening the gap between Adelaide and Sydney or Melbourne.”