Is Victoria’s Property Tax Grab Scaring Investors Away?

When being obsessed with taxing the people you perceive to be the rich is your policy eventually those people look else where.
As always I have included two different sets of numbers in our weekly wrap up of the weekend.

Scheduled Auctions
1330
Reported Auctions
636
Total Sold
522
Total Passed In
114
Clearance Rate
82%

Scheduled Auctions
1157
Reported Auctions
913
Total Sold
610
Total Passed In
214
Clearance Rate
67%

The Melbourne property market was expected to bounce back after the Reserve Bank of Australia (RBA) signalled the end of rate hikes, with many hopeful that interest rate relief would bring buyers and investors back in force. Yet, despite some stability, the anticipated surge hasn’t quite materialized.

While rising interest rates played a role in cooling the market, there’s another factor at play: the Victorian government’s persistent push to extract more revenue from property investors. With an ever-growing list of taxes, levies, and policy changes targeting property owners, many are questioning whether investing in Victoria is worth the trouble.

The Relentless Tax Assault on Investors

Victoria already has some of the highest property-related taxes in the country, and the government isn’t shy about finding new ways to increase its cut. Recent years have seen:

Higher Land Tax Rates: The 2023 state budget introduced new land tax brackets, capturing more investors and adding thousands to their annual bills.
Vacant Residential Land Tax Expansion: Previously limited to inner-city areas, the tax now applies across Victoria, penalizing investors who don’t rent out their properties.
Short-Term Rental Levies: A new tax on platforms like Airbnb adds yet another layer of cost to property ownership.
Increased Stamp Duty for Foreign Investors: Additional surcharges make Melbourne less attractive for overseas buyers, further reducing demand.

These policies come on top of existing burdens like capital gains tax, stamp duty, and ongoing council rates. While framed as measures to improve housing affordability, they risk doing the opposite by discouraging investment and limiting supply.

Investor Exodus: A Self-Inflicted Wound?

A growing number of investors are now looking to other states with more favourable tax conditions. Queensland, for example, recently walked back its aggressive land tax changes after backlash, recognizing the potential damage to rental supply and affordability. Meanwhile, Victoria seems determined to push ahead, even as rents rise and vacancy rates remain tight.

Fewer investors mean fewer rental properties, and with rental demand already high, tenants are feeling the squeeze. Ironically, policies designed to ease affordability could end up doing the opposite, as higher investor costs are inevitably passed down to renters.

The Market Needs Confidence, Not More Taxes

If the Victorian government truly wants to stimulate the property market, it needs to restore investor confidence. That means easing tax pressures, providing policy certainty, and recognizing that a healthy property market requires a balance between homeownership and investment.

For now, however, the message to investors seems clear: look elsewhere, is that the answer though and while everyone is looking elsewhere should you be looking closer to home.

I often worry about buying properties you will never see or don’t know about and are purely reliant on someone else telling you everything this ok.

When everyone is going one way in investing sometimes it is best to do the opposite.