Victorian property tax hike to hit development

Developers and owners have slammed Victoria’s proposed $2.4bn in property tax increases as a threat to a still fragile recovery.

Victorian Treasurer Tim Pallas. Picture: Sarah Matray

Developers and property owners have slammed $2.4bn in property tax increases proposed in the Victorian budget as likely to quash the sector’s still fragile recovery.

The government has been warned that tax hikes over the next four years targeting high-end property buyers and affluent landlords with land tax and stamp duty hikes would hurt a wide range of homeowners and buyers.

Developers also expressed concerns about being hit with new windfall gain tax on some land where rezoning has provided an uplift in property values, which could harm the prospects of major projects.

They said the plan was shortsighted and would strangle the state’s attractiveness as a place to invest and do business, threatening jobs and sending up house prices.

Property groups said the moves would punish both existing homeowners and those looking to move home, while taxes on risk taking and investment made Victoria a less attractive place to invest and do business.

“These increases show a fundamental lack of understanding. Where they don’t hit homebuyers directly, they will need to be passed through and will only increase the cost of housing. These are not measures targeted at the ultra-rich jet setting pack – they will hurt Victorian families at every level of the housing market,” Urban Development Institute of Australia, Victorian division, chief executive Matthew Kandelaars said.

“With property taxes representing nearly 50 cents in every dollar of state government revenue, we’d hoped that the days of the government turning out the pockets of homeowners were over,” Mr Kandelaars said.

HIA executive director Fiona Nield dubbed the moves unfair when Victoria already has the highest stamp duty rates in the country.

She said: “the activity generated from residential development supports jobs and economic activity and is key to supporting all Victorians as the state recovers from the economic shock of COVID-19”.

The HIA argued that new taxes would be passed on in higher land prices and stamp duty inhibited people from selling properties to allow for new homes to be built, prompting a direct impact on new housing affordability.

“Changing the goalposts after property has been purchased is unfair. It seems this will particularly impact in regional Victoria, as some urban growth land in Melbourne may be exempted,” Ms Nield said.

The HIA said the windfall gain tax was “particularly concerning” and appeared to take a disproportionate share of property value from landowners that were helping to grow housing supply.

The Property Council of Australia said Victoria’s land tax rates, and stamp duty rates would be higher than in any other jurisdiction.

“Victoria’s competitive advantage will be lost to other cities where governments are rolling out the red carpet to welcome new investment because they know it is good for jobs,” PCA executive director, Victoria, Danni Hunter said.

Ms Hunter said the new tax on rezoning would deter development activity and was a “blatant and exorbitant attempt by the government to profiteer” from the property industry’s city-shaping projects, and also warned that it may hit infrastructure sites like new logistics hubs.

“This new tax is the ninth new tax on Victorian property introduced under the Andrews/Pallas administration. If their intent is to drive investment to other Australian cities who are rolling out the red carpet for investment and creating jobs, then this new tax will do it,” Ms Hunter said.