Victoria's Land Tax Shift: A Boon for First-Time Home Buyers Amidst Investor Retreat

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According to Ray White Group's chief economist, Nerida Conisbee, Victoria now bears the distinction of having Australia's highest property taxes. The repercussions of this high-tax situation are substantial, as individual investors, crucial to the rental market, are progressively withdrawing, leading to a reduction in available rental properties.

Supporting this trend, statistics from the Victorian Government reveal a decline of 24,726 rental properties over the previous year, marking a significant drop in rental bonds. Melbourne alone witnessed a decrease of 23,108 rental properties, equating to a 4.2% reduction in its rental stock.

Contrary to concerns about reduced investor participation being detrimental, it presents an opportunity for Victorian tenants and first-time home buyers. CoreLogic's Tim Lawless highlighted a decline in Melbourne rents, attributed to decreased unit rents, leading to more competitive housing prices for newcomers.

Lesser investor engagement correlates with slowing rent growth and rising vacancy rates, indicating an alignment in reduced supply and demand dynamics. This stabilisation benefits those entering the housing market for the first time.

Melbourne's dwelling values have fallen by 3.0% year-on-year as of January 2025, further facilitating affordability for first-time buyers. Additionally, Victoria leads in the share of first-time home buyers across Australia, supported by Australian Bureau of Statistics data.

As investors exit the market, the properties they sell typically transition to other buyers, including first-time purchasers, who help maintain overall market equilibrium by removing housing from the rental pool, thus matching reductions in both supply and demand.

A strategic policy initiative to enhance homeownership rates could involve decreasing the number of investors, aligning with Victoria's current policy direction of encouraging sales to first-time buyers.

Published:Thursday, 20th Feb 2025
Source: Paige Estritori

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