Jeff Kennett: Decision to increase land tax on investment properties hurting aspirational Australians

We could be heading for a housing “Armageddon” if governments continue to attack middle income Australians who are providing the bulk of the country’s rental accommodation.

Australia has a chronic shortage of housing. Targets have been set by the federal and Victorian governments. None will be met.

In fact, decisions by governments will guarantee the targets will NOT be met.

In Victoria, the Andrews/Allan government’s decision to increase land tax on investment properties, while lowering the financial entry point at which land tax is to be paid, is having a devastating impact on the reduction of houses available for rental.

Ask any real estate agent who has a large rent roll, and they will tell you it has been reduced by between 20 to 25 per cent in the last year as families are selling their investment properties.

These are not homeowners who might be struggling with interest rates, but small investors who have saved up to buy an investment property for both income and as their nest egg for their later years.

Decisions by governments will ensure housing targets are not met. Picture: David Crosling

The ALP has made their investment marginal or worse financially, and when combined with higher charges, and the rules that favour the tenants over the owner of the property, the latter are selling.

That might be good for some young Victorians trying to buy their first home, particularly as some properties are selling at reduced prices in many areas.

But for those who can only aspire to rent it is a disaster. Substantially less properties to choose from, and at much higher prices, and those who have retained their investment properties, lifting the rentals they charge to recover the extra costs imposed by Daniel Andrews and Jacinta Allan.

The Australian Bureau of Statistics says the percentage of renters looking for accommodation now has risen to 31 per cent. A huge number and growing, as purchasing a home is beyond the reach of so many young people.

A number of families are selling their investment properties.

This is slowly changing the social makeup of the country from home ownership to one of rental accommodation.

Or living at home longer with parents!

Further unsettling in the rental investment market, the federal government has reportedly asked Treasury to review the tax breaks paid to property investors including negative gearing and the capital gains tax discount.

No details yet on how any changes may be applied going into the federal election or applied after the election.

Any changes will be applied nationally but add any changes to what is occurring here in Victoria, and you have an Armageddon – a wipe-out of rental accommodation.

It is easier and safer to put your money on deposit or into shares than living with the hassles and costs of owning an investment property for rental in Victoria.

Governments keep changing the rules, be it for superannuation or now owning investment properties.

There are substantially less properties for renters to choose from.

Many new settlers to Australia after the war arrived with nothing, worked all their lives, bought an investment property for financial strength in their later years, are confused and angry at the continuing changes to the rules that attack and undermine their years of planning.

But it is not just senior citizens.

Do you know, that of the 2,268,161 Australians who invest in a rental property, 71 per cent own just one investment property!

More than 700,000 are under 45 years old.

Only 949,519 investors made a loss on their property in 2021-22 making them negatively geared.

But get this – 28,000 teachers and 27,600 nurses use negative gearing on their investment properties.

And 65 per cent of negatively geared property investors have a taxable income of $120,000 or less.

Hardly wealthy Australians. Just hardworking, aspirational Australians trying to improve their lot in life.

Without arguing the case for or against the potential changes to negative gearing or the capital gains tax discount, if implemented the impact will lead to more sales of houses now available for rent.

Many Australians are confused and angry about the continuing changes to the housing rules.

Governments continually attack middle income Australians who are providing the bulk of the country’s rental accommodation, while doing nothing to pull the levers they have at their control, and which are adding to inflation and keeping interest rates high.

Increasing spending by the federal and state governments, a bloated and in many cases an expensive and inefficient public service, and a failure to manage efficiently those expenditures for which they have responsibility.

Finally, the Victorian government committed itself to build 80,000 new homes a year for the next 10 years in the Housing Policy they released last year.

Housing Minister Harriet Shing said last week that was only a commitment for approvals, not to actually build new houses. There is nothing in the Housing Policy that talks about approvals, just building 80,000 new houses. The goalposts have moved. The government is admitting their policy has failed.

The only way to attack our housing and rental shortage is for governments to release more land, reduce their costs and charges, restrict the involvement of third parties from holding up projects, and finally give investors and the investing community the one thing that is blatantly missing at present – consistent policy.

The ALP and the Greens are consistently working against aspirational Australians, young Australians, teachers and nurses. Why?

Have a good day.

Jeff Kennett is a former Premier of Victoria

Originally published as Jeff Kennett: Decision to increase land tax on investment properties hurting aspirational Australians