Why overseas property investors must be lured back to Victoria

A peak body has called on the Victorian government to cut taxes on foreign investors and restore incentives for buying off the plan, to address the housing crisis and breathe life into Melbourne.

A peak housing development body has called on the Victorian government to reduce taxes for foreign investors and restore incentives for buying apartments off the plan, to help solve the state’s housing crisis and breathe life back into Melbourne.

The Urban Development Institute of Victoria (UDIA VIC) on Friday said conditions for overseas investors had to be changed, to improve the viability of medium and high-density projects in central Melbourne and the suburbs.

Investor and buyer confidence in the state was now at a record low, it said.

UDIA VIC chief Linda Allison said taxes currently comprised about 40 per cent of the price of a new home or apartment.

Foreign investors were forced to pay an additional eight per cent tax — on top of the standard Stamp Duty amount of between five and six per cent that everybody had to pay — which acted as a massive disincentive, she said.

Melbourne needs higher density housing, says the UDIA. Picture: Mark Stewart

“We are calling for a review of the impact of taxes such as the foreign purchaser additional duty, which acts as a brake on overseas financial institutions investing in Victoria. This disincentive means they simply look elsewhere,” she said.

Ms Allison told the Herald Sun when the Victorian government first introduced the extra helfy tax on foreign investors in 2015/2016 “we saw developments just grind to a halt”.

A comprehensive report showed the need for greater density housing in the state — something also acknowledged in the Victorian Government’s recently released Housing Statement, she said.

And the great Australian dream of a house in the suburbs was also still very much alive, Ms Allison said.

“We know that many Victorians look to our newer suburbs for affordability and a lifestyle that medium-density development cannot offer. Many people still dream of owning their own home on their own block. This is true in both metropolitan Melbourne and in the regions,” she said.

“People should be able to live where they want to and in the type of homes they want. Our newer suburbs offer affordability, community, and lifestyle. The key challenge will be to make the established areas of Melbourne more affordable – the way to do that is to increase supply.”