New Victorian property taxes making housing crisis worse, Housing Industry Association warms

The state’s housing crisis is being made worse by new property taxes which are causing less homes to be built, an industry report warns.

Victoria’s housing crisis is being made worse by state government taxes, according to a damning new report.

A review by Housing Industry Australia has found market confidence in Victoria is devastatingly low and taxes are to blame.

The national building industry association has warned that Victoria also trails all other states when it comes to industry recovery, a development it blames on increased land duties, the new windfall gains charges, and rising building levies.

“Tax imposts on housing have adversely affected market confidence and will delay a recovery in new home building in Victoria despite strong underlying demand,” HIA regional director Keith Ryan said.

“In addition to the 37 per cent of the cost of a house and land package in Melbourne that is attributable to government, new imposts include a windfall gains tax of up to 62.5 per cent, a land tax surcharge for Victorians with more than one home, and inflated costs associated with ongoing changes to the National Construction Code.

“These additional taxes and regulatory changes have added to the uncertainty created by rising interest rates and will see the recovery in home building in Victoria delayed until 2025.”

The Housing Industry Australia has warned state taxes are hurting the construction sector. Picture: Supplied

The damning findings, contained in the HIA Economic and Industry Outlook report, come as the state government continues to plough ahead with its landmark housing policy.

However planning minister Sonya Kilkenny has repeatedly dodged questions about whether the government is already falling behind its target of building 800,000 new homes.

Ms Kilkenny has previously described the target as “ambitious” but declined to clarify if early benchmarks have been met.

Mr Ryan warned the pace of building both detached and semi-detached homes is set to remain subdued.

“The 2024/25 financial year is expected to mark the trough in the cycle for Victorian detached housing, with only a marginal improvement in 2025/26,” he said.

“Higher density housing development is even more constrained. Commencements of multi-units are down by more than 40 per cent since 2015, with 2023/24 concluding the two weakest years for the sector since 2011/12. Activity is not expected to truly gain steam until the second half of 2025.”

He called on the state government to pledge to not introduce anymore taxes and abolish punitive charges to address the major problem of land shortages.

He also said the federal government should streamline the visa system to make it easier to bring in more workers for “in-demand trade”.

A Victorian Government spokesperson said: “Victoria leads the nation when it comes to housing approvals – approving thousands more homes than NSW and Queensland.

“We know there’s more work to do and that’s why we’ll continue to pull every lever we can to enable 800,000 homes to be built over the next decade – working with councils and developers to make good planning decisions faster and building thousands of social and affordable homes.”