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Australia's housing shortage has reached a crisis level, pressing governments for solutions. Dive into the must-know details for investors in Victoria.
The housing shortage in Australia is at a crisis. And governments, both state and federal, are under pressure to find solutions in the short and long term.
In an attempt to raise funds for social housing initiatives and cool property prices, as of January 2024, the Victorian state government have introduced reforms on land tax which will directly impact investors.
And the change is significant with the tax-free threshold reduced from $300,000 to just $50,000, and also lifting the tax rate to $975 plus 0.1 per cent of the value of an investor’s properties worth more than $300,000.
Property investors, many classified as ‘mum and dad investors’, are feeling the cost of living pressures too. Following major increases in interest rates across 2022 and 2023, add higher costs to investors will likely see three potential outcomes.
According to the Domain Rent Report, Melbourne average rents in the 12 months to March have increased by 14.6%. With these tax changes, in order to maintain their cost base, landlords will have further reason to increase rents, resulting in more pressure on the large market of tenancies already struggling with ongoing high rents.
Faced with such tax implications, many investors will be pushed to sell their investment. Returns in this market are already tight, so much of this stock will be picked up by owner occupiers. While this does present a small positive for the housing market, it just means there will be less available rental stock.
The Victorian state government have introduced major reforms on land tax, which will directly impact investors.
It will be bad news for Victorians with investors moving their focus into alternative locations with friendlier tax environments, such as Perth which is seeing a property renaissance and southeast Queensland, a popular choice for Victorians in both investment and interstate migration.
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