How about you stop the taxing and start talking?

Another day, another tax; property sector bewildered by blissfully ignorant State Government

Opinion Editorial published in the Herald Sun on 05 October 2023
By Quentin Kilian, CEO Real Estate Institute of Victoria

Yet again, we are left floored by the Victorian Government’s ability to disregard industry engagement, ignore expert property sector recommendations and undermine the confidence of one the state’s most significant economic contributors.

Yesterday, via an announcement to extend the already contentious vacant residential land tax, this Government is showing a determination to destroy the confidence of thousands of mum and dad property investors through increasing regulation and constantly increasing costs.

Less than a fortnight ago, the Government released its much anticipated Housing Statement and, since, we have already seen two new property tax increases announced.

This is on top of the May State Budget announcement of another amendment to land tax. Under the guise of a COVID-19 debt levy, thresholds were lowered to ensure the Government extracted even more tax from rental providers.

Our Treasurer has established a track record of using annual State Budgets to pillage the property sector, so to see him now turn to a weekly rhythm is hugely concerning. What can we expect next week?

Each time a new tax or regulation is introduced into the property sector, it sends a message to think twice about investing in the state of Victoria.

Unsurprisingly, many have already made a move, with recent external reports indicating one in four Melbourne rental providers have sold their properties over the past 12 months, exacerbating the current rental crisis.

This data is supported by our own - a recent survey of REIV members found 90 per cent of real estate agents in Victoria have had an increase in contact from investors looking to recover increased costs because of the Victorian Government’s new and increased taxes on investment properties.

The REIV anticipates even more investors will leave Victoria over the next year, with a chorus of concern about a loss of control over assets, courtesy of the increased taxation and ongoing disincentives to invest.

In trying to understand the ongoing attack on investors, the REIV, and other industry analysts, have concluded that this Government is probably just unaware that more than 80 per cent of the rental market is owned by individuals, most of whom, according the Australian Tax Office, report a taxable income of less than $100,000. Hardly a tax on the rich.

Instead of a fixation on taxation, the real estate sector – and property participants more broadly – would prefer to see the Government to show some leadership and use strategies to incentivise investment in Victoria.

Following a period of great flux, due to a confluence of environmental and market events starting with COVID-19 and finishing with successive interest rate rises, the property industry is craving some consistency.

Carefully considered policy development based in a principle of incentivisation along with some measured implementation will create the required stability, and grow market confidence.

This is a message that the REIV – and other sector leaders – has been sending to the Government for some time. Alas, it repeatedly falls on deaf ears.

The unfortunate thing is that in the absence of any leadership on good public policy development, others feel compelled to step up and have a go. We saw it with the Greens and their flawed rent freeze idea.

We appreciate the State Government’s recent focus on the housing sector and respect the effort in creating a Housing Statement. While the Statement would have been better if there had been more consultation with industry, there are indeed some sound longer-term solutions included in the Housing Statement.

These include the fast-tracking of planning approvals and increased investment in affordable housing.

What the Housing Statement doesn’t do, though, is focus on the huge challenges that are here and now, such as the fleeing of investors due to ongoing tax hikes and other new fees.

The REIV is calling on the Victorian Government to engage the sector properly, so together we can work on better policy development that benefits all property participants.

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