Developed societies around the world are facing similar and very real political issues: slow growth economic consequences of financial system de-leveraging and relentless demographics of an aging population. Currently governments should be addressing energy, infrastructure investment and job creation strategies to preserve standards of living in light of rapidly shifting global economic and political realities, they are instead trying to figure out any way to avoid the politics behind prioritization of spending, rationing public largess and distributing the burden to pay for it. This debate will become increasingly greater as the average age of voters moves toward retirement.
In thinking about implications for real estate investors, property tax burdens are an obvious concern. In Australia, where avoiding ones share of the tax burden has become an ever increasing system in which investors create wealth; the change and reliance upon taxes from those who have a more disposable income may become greater.
Although we continue to have liquidity in property markets it is important not to lose sight of the fact that tax policy will have a meaningful effect on returns, hold duration and the composition of buyer/renter population. At the national and state level tax policy will also have an impact on real and relative job growth which translates into rental rate growth and long term property valuations.
In the end, governments can only receive the money from the people who have it. And the reality is, long-standing public sector income redistribution schemes may be around for a long time to come.
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