This week the Victorian Government announced it’s State budget and it is bad news for both property investors and renters alike.
After locking people in their homes for months on end and amassing a multi-billion dollar lockdown debt in the process, the Victorian government now expects rental providers aka landlords to foot the bill for a debt hole dug solely thanks to mismanagement by this government.
By implementing a COVID Debt Levy for the next decade, almost 400,000 Victorians will have to pay land tax for the first time. The land tax threshold will be lowered on 1 January 2024 from $300,000 to $50,000. Property investors will pay a fixed $500 fee each year for landholdings worth between $50,000-$100,000, $975 if above $100,000 and an extra 0.1% for every dollar above $300,000.
On average, property investors will pay $1300 a year in extra tax. This will squarely hit many mum and dad property investors that make up around 40% of rental providers providing housing for renters. The premier even had the audacity to justify the Land tax increase by arguing they were taxing people “doing well”. Property in Victoria has risen by 87% in the last 10 years. The Government’s Land tax take over the same period has increased 340%. Seems Spring St is doing rather well too.
To put things in perspective, take a look at this table:
As a result of this land tax, rents will go up. Just wait and watch. Rents will go up.
Why? Because:
a) property owners will look to offset the skyrocketing costs of owning a rental property amidst increasing compliance costs mandated by the government. Annual rental safety checks is one example, now add to the mix Land tax; and
b) existing property owners will sell up due to a mix of unaffordability (ie: too expensive to keep the home) and simply being fed up with the need to jump through an increasing number of hoops (I am hearing this more and more).
Fewer rental properties due to owners selling them and getting out, means fewer homes for rent.
Simple supply and demand. Less homes to rent. More demand for any rental homes available. Rental prices increase.
Yet, the bean counters in the government don’t seem to be able to get their heads around these simple fundamentals, continuing to blame interest rates, amongst other things.
So here is my question…
The entire state of Victoria was impacted by these mandated lockdowns and the Government’s splash of cash to rack up this enormous debt.
Yet, only property investors are on the hook to pay this COVID Debt Levy. For 10 years. What about share investors? Bitcoin speculators? Anyone investing in other commodities? Why has one single investment choice been singled out? Because that is what has happened here. Those who have chosen to invest their money in real estate are being penalised. Those that chose to invest their money elsewhere are not. Why?
That is the question we need to be asking. And demanding an answer.
At Chamberlain Property Advocates we understand that staying across changes to rules such as land tax can be daunting when considering buying a home.
That’s where we come in! We love helping buyers navigate the red tape and clearly plan their purchase.
Are you looking to buy a home but feel overwhelmed at the information you need to digest? Ask about our Home Buyer Service, where we do all of the legwork on your behalf to MAKE IT EASY to secure your next property.
To book a free 20-minute consultation, simply click here and choose a time convenient to you. Alternatively, give me a call on 03 9686 2288 to discuss how I can help you.
