The Greens have delayed the legislation, but investors are still leaving the state in droves
The Victorian state government has been forced to delay proposed property tax hikes, providing temporary relief to worried property investors.
The Greens, who have been pushing for rent freeze legislation, have played a key role in stalling the legislation, according to a report by The Australian.
Victoria already holds the title for the weakest state in terms of price rises and has witnessed a surge in the number of investors selling their properties. The state government initially introduced property tax changes in its budget last May, and then expanded the tax net by extending the vacant residential land tax beyond the inner city to encompass the entire state. This tax will impact both investors and holiday homeowners starting in January, The Australian reported.
Furthermore, the Victorian government has implemented a windfall gains tax for property developers and doubled the tax on absentee buyers from 2% to 4%. Additionally, it has levied a 7.5% tax on annual revenue generated from the short-term rental market.
Irina Tan, a representative from Pitcher Partners, told The Australian that the proposed changes to Victoria's land tax regime will have a significant impact on anyone involved in buying or selling land, describing them as a "seismic shift" from the current system.
Critics of the proposed changes, including lawyers at Russell Kennedy, have described them as unlikely to be effective, questioning their alignment with consumer protection objectives.
However, it is the unexpected expansion of the vacant land tax that has sparked widespread frustration within the property sector, according to The Australian. Under the plan, owners of a second property beyond their family home in Victoria will face a tax of $975 plus 0.1%, with a threshold of $50,000. Owners must pay this tax unless they have resided in the property for a minimum of four weeks each year or leased it for at least six months.
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Recent sales statistics indicate a growing number of property owners selling their assets across Victoria. The percentage of new sales driven by investors is now running at up to twice the national average, The Australian reported. In the coming months, holiday homeowners are expected to join the wave of selling.
Real estate agents in Victoria have reported an increase in sellers attempting to include property tax liabilities in the sales price, but new state vendor rules will soon prohibit this practice.
One in four Melbourne rental providers have sold their properties in the past 12 months, according to the Real Estate Institute of Victoria.
“Investors are fleeing and looking at other states or alternative investment vehicles,” REIV CEO Quentin Kilian told The Australian. “Each time a new tax or a new regulation is introduced it beats confidence out of one of the state’s most important economic contributors.”
While Melbourne remains a popular destination for new immigrants, the city’s vacancy rate is hovering around 1%, leading industry analysts to predict further rental price increases.
Negotiations around the new taxes are expected to resume when the Victorian parliament reconvenes on Nov. 14, The Australian reported.
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