Addressing Victoria’s Property Investment Crisis

In a recent article by Gus McCubbing for The Australian Financial Review, the spotlight was turned on Victoria’s increasingly challenging landscape for property investors. The article “Tax rise ‘last nail in the coffin’ for Victorian property investors” paints a stark picture of the current situation, driven by recent government decisions to impose additional levies on landowners. As a director on the board of the Property Investment Professionals of Australia (PIPA), I find it imperative to discuss the implications of these changes and underscore the importance of a balanced approach to taxation within the property sector.

The article in the financial review highlights the experiences of property managers and investors who are feeling the brunt of the Victorian government’s budget decisions. Carmen Littley, a property manager based in Werribee, shared her firsthand observations of the exodus of investors from the market. This trend threatens to exacerbate the existing rental stock shortage. The introduction of the COVID-19 debt levy, which aims to extract $4.7 billion from property investors over four years, alongside a reduction in the tax-free threshold for land tax, has sent shockwaves through the investment community.

The consequences of these tax hikes are multifaceted. On one hand, they aim to address the state’s financial burdens; on the other, they risk alienating a crucial housing market segment. The reduction in investment activity not only impacts the availability of rental properties but also has broader economic implications. Geoff White, a real estate agent specialising in Melbourne’s Docklands area, noted the significant number of investors selling off their properties due to unsustainable costs, further diminishing the private rental supply.

The recent PIPA (www.pipa.asn.au) annual investor sentiment survey revealed Victoria to be the least attractive state for property investors, with rising land taxes cited as a primary concern. This sentiment is echoed by CoreLogic research director Tim Lawless, who pointed out the comparative disadvantage investors face in Victoria, including lower yields and higher costs relative to other states.

The situation in Victoria is a cautionary tale of the delicate balance required in taxation policy. While it’s undeniable that the state faces a daunting financial challenge in the wake of the pandemic, it’s crucial to consider the long-term implications of discouraging property investment. An investment-friendly environment is essential for sustaining a healthy, vibrant property market that can meet the housing needs of all Victorians.

As we navigate these challenging times, it’s more important than ever for stakeholders in the property sector to engage in constructive dialogue with policymakers. Our goal should be to advocate for policies that support the recovery and growth of the property market while addressing fiscal responsibilities in a manner that doesn’t disproportionately impact any single group.

I urge our members of PIPA and the broader property investment community to stay informed and actively participate in discussions on this critical issue. Together, we can work towards solutions that ensure a robust, sustainable future for property investment in Victoria and beyond.

For a deeper dive into the issues currently facing Victorian property investors, I highly recommend reading Gus McCubbing’s insightful article in The Australian Financial Review today, Tuesday, March 5th 2024.

Richard Crabb, Director, Property Investment Professionals of Australia (PIPA) | CEO ASPIRE Property Advisor Network Pty Ltd

[Source: Gus McCubbing, “Tax rise ‘last nail in the coffin’ for Victorian property investors,” The Australian Financial Review, March 4, 2024.]