Vacation homes on land bought for as little as $400 and passed down through generations attract eye-watering tax bills that can force families to sell.
The south coast of NSW became a sweltering real estate market during the Covid period, driving the prices of modest holiday homes stratospherically.
This has resulted in many owners suddenly having to pay land tax for the first time, which is calculated on the value of the site for a second home in a real estate portfolio worth more than $969,000.
Sharon Deadman, principal owner of the Ray White estate agency serving the small towns of Bendalong and Mayana, told Daily Mail Australia she had “many, many” shocked calls as property prices rose by as much as 300 percent.
“Some of them didn’t know what we sell properties for,” she said.
“The last three sales in Bendalong have been over $2 million.”
This two-storey, three-bedroom home in the NSW south coast town of Bendalong is listed with an asking price of $2.8 million
Property owners in NSW’s quaint southern coastal town of Bendalong (pictured) have complained they’ve been landed with a massive land tax hike
A two-story, three-bedroom home in the city is currently being offered for an asking price of $2.8 million.
Michelle Whitehead, whose family has owned a property in Bendalong since her grandmother won the right to buy it for about $400 in 1960, told Daily Mail Australia she disputed the forecast that her land would increase in value by 62 percent next year.
This meant her tax bill went from $7,000 this year, having already gone from $1,200 to more than $16,000 in the space of 12 months.
“I have no objection to paying taxes,” said Mrs Whitehead.
‘What I object to is the method used to arrive at the valuation and their prognosis that the land value will rise by 62 percent next year.
“I really feel sorry for people who have inherited houses when their mom and dad may have been on the ballot for whatever year,” Realtor Deadman added.
“Their parents probably worked really hard to afford a vacation home because they had nowhere else to go, but that dynamic has changed.”
The land tax is determined on the average value of the land from the current year of the assessment and over the past two years.
Property on the south coast of NSW saw a strong average increase of 38 per cent in value, according to the NSW Valuer General which makes the findings.
In the 2022 Land Valuation Annual Report, the state’s appraiser general, David Parker, wrote that work-from-home arrangements promoted during the Covid pandemic had driven up prices.
Bendalong real estate agent Sharon Deadman says coastal properties were so in demand during the Covid period that they were sold through direct offers before they hit the internet
“Regional and coastal markets with accessibility to regional and metropolitan centers were particularly sought after,” the report said.
The sharp increases are being questioned by many property owners as they don’t seem to reflect recent sales in the area.
Ms Deadman said land tax values had been ‘distorted’ by Covid.
“Maybe three properties have been sold here in a year and a half,” she said.
“It’s not three properties that are sold every month.”
She said the market went crazy during the pandemic because people were able to work from home, had too much money to spend due to travel restrictions and historically low interest rates.
“During Covid, we quoted most of our properties as price through negotiation because we didn’t know what things would be sold for,” she said.
“We had sold three houses before they came on the internet.
“This was because there was a mass exodus from Sydney and Canberra and all major metropolitan centres.”
Ms Deadman said the first property to be sold in Bendalong after the latest land tax valuation, which took place in July last year, will be the telltale sign of whether the market could fall.
Although Wayana has a premium strip of homes overlooking the water, it, along with Bendalong, catered to those of rather modest means after land was approved for cheap sale in the late 1950s and 1960s.
“Homes were made from the remains of this club or that club and their partner’s house that was demolished or they moved the house out of Sydney, so a lot of them were very basic small homes,” said Ms Deadman.
In theory, a rising land tax should encourage more owners to rent out their properties, which could alleviate the current critical shortage of such housing, but Ms. Deadman pointed out a catch with that idea.
“I can’t take any more vacation homes because I don’t have the staff to clean them and the people who would normally clean these homes can’t afford to live here,” she said.