Melbourne buyers bow out over land tax

Land tax in Victoria, as well as high prices, is on the minds of some private landlords selling in Melbourne.

Some investors are selling out of Melbourne commercial real estate amid high land tax costs. Picture: Mark Stewart

High land tax costs and strong ­demand from local and offshore buyers are encouraging some ­private investors in Melbourne to sell, according to Colliers International.

The incentive was particularly strong for owners of development sites or vacant land, facing a significant land tax bill on the undeveloped property.

Land in Victoria is largely ­valued every two years, and after the most recent round of valuations last year a number of landlords received higher bills after the value of their land soared compared with 2014.

Some CBD landlords have been looking to improve their ­returns by adding retail tenants on level one, collecting higher rent than they would from an ­office tenant, The Australian has previously reported.

Others have taken the opportunity to exit their holdings, mindful of an environment where continued demand from buyers has pushed prices to high levels, and yet more buyers are looking to enter the market, Colliers International director of Melbourne city sales Daniel Wolman said.

“The pricing has come up so much that people are happy to sell and get rid of that issue (of land tax),” Mr Wolman said.

A South Melbourne development site recently changed hands through Colliers, with a local private owner selling to a local developer.

Industry sources tipped the price of 8 Palmerston Crescent at approximately $15 million. Agents Daniel Wolman, Matt Stagg and Oliver Hay declined to comment.

Although the site has no current permit, it is understood a mixed-use development with high-end apartments, office space and retail is likely.

The 908sq m site, for sale for the first time in 30 years, is nearby Melbourne’s Botanic Gardens, with four street frontages and ­access to public transport.