Victorian property taxes making it less attractive than other states to investors: PropTrack, REIV

Investor numbers have plunged and Victoria’s most powerful real estate lobby has warned landlords are looking elsewhere. But there could be some surprising bright spots in regional areas.

High taxation is turning investors away from Melbourne and Victoria. Picture: Jason Edwards.

Victoria’s chief real estate lobby group believes the state is no longer as attractive to investors as other states, with property taxes slashing investor numbers by the thousands.

Australian Bureau of Statistics data show 47,775 new investment loans issued in the state in the 12 months to April. A year prior that number was 51,155, while going back another 12 months it tops 60,000.

Every other major Australian capital recorded an increase in investor loans over the past 12 months, with only Tasmania and the ACT joining Victoria in decline.

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Real Estate Institute of Victoria president Jacob Caine said the organisation had been advocating strongly for a change to taxation settings as they were causing investors to exit — putting pressure on the state’s rental market.

Compounding this was that Melbourne’s home prices have risen so high it is now the seventh least affordable city in the world according to a Demographia report released last week — which didn’t leave as much scope for growth as some other capitals.

“So it appears less attractive than other parts of Australia,” Mr Caine said.

“The conditions in Victoria for property investment, and there’s no way of sugar-coating this, are less attractive than they were two years ago.”

1/24 Bell St, Moe, sold for $260,000 in 2022. Prices have since grown substantially.

Meanwhile, a PropTrack report highlighting the nation’s 10 best growth areas for investors to consider for both houses and unit included just one from Victoria.

Senior economist Eleanor Creagh said the reality was that would-be landlords were now looking elsewhere, largely due to the state’s reputation for being overtaxed.

With relatively high property prices, high land tax and the nation’s highest stamp duty costs, Ms Creagh said the incentive to invest in Victoria was less than it was in other areas.

The state has also built more homes than other states in recent years — limiting rental and sale price growth.

“The incentive to invest interstate is far greater at the moment, particularly given all of those other states have very tight rental markets with low vacancy rates,” Ms Creagh said.

“It is largely due to the land tax changes, it’s probably one of the least attractive regions for investors at the moment.”

Warracknabeal proved a wise spot to invest in over the past five years, with homes like 2 Milbourne St well ahead on its last sale after a $370,000 deal in 2023.

Ms Creagh analysed the nation’s 10 best suburbs for units and the 10 best for houses in terms of median price increases over the past five years.

The only Victorian entry was Moe.

Units in the regional Gippsland town about 131km east of Melbourne have risen from $118,000 in 2019 to $250,000 today (113 per cent).

But it did not make the top 10 list for houses.

Mr Caine said it was good to see a town like Moe in the nation’s top earners list for the past five years, and there was every chance it could continue to grow despite changes to key employment prospects in the region.

“The other factor likely driving that growth is the increasing unaffordability of metropolitan and outer-ring Melbourne suburbs,” Mr Caine said.

“So it’s not inconceivable that Moe could continue to grow in terms of price and population over the coming years as people seek out affordable alternatives to metropolitan living.”

Propertyology real estate investment boss Simon Pressley announced in October last year they would not recommend Victoria to investors until there was a change in attitude from the state’s government.

14 Nankervis Court, Beechworth, sold for $965,000 earlier this year — up from $570,000 when it last changed hands in 2020.

The firm is instead steering would-be investors to eight cities across NSW, Tasmania, South Australia and Queensland.

“We have always been borderless, and I do love Victoria, but you need to forget about where you live and where you have been on holiday and be borderless when investing,” he said.

Mr Pressley’s most recent encounter was yesterday, with a Victoria-based investor calling confident that they did not believe it would be wise to invest in their own backyard.

However, he warned the lack of new investment in the state had made the situation for tenants “ugly”.

Mr Pressley said he now feared it would ultimately lead to many never being able to afford to buy their own home as they grappled with surging costs amid shortages of rentals in the state.

However, Ms Creagh noted there were a range of investor strategies and individuals would be best to look at what worked for them.

For those still open to investing in Victoria, the economist said the past five years showed the best capital gains in percentage terms had emerged in the central Victorian town of Warracknabeal, where the median house price jumped from $112,000 up to $245,000 in a 119 per cent rise.

1/179 The Boulevard, Shepparton, made $445,000 when it sold earlier this year. Well up on what it last sold for.

Orbost was next best, up from $165,000 to $343,000 (109 per cent), followed by Beechworth with a $910,000 median today up 102 per cent from $450,000 in 2019.

For units, beyond Moe, the next best bets were Shepparton, up to $365,000 from just $200,000 five years ago, and Yarrawonga where affordable residences had climbed from $258,000 to $453,000 in the same time frame.

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