Victoria Property Investors Exit Amid Tax Changes

Property investors are increasingly selling out of Victoria as rising taxes make the market less lucrative, potentially cooling prices for buyers but creating concerns about future housing shortages. Investor sales in the state have surged, now running one-third higher than the national average, as new levies alter the financial landscape.

Victoria's property investment market has faced mounting pressure since the state government introduced additional taxes on January 1, with further levies rolled out earlier in May 2023. On average, 9% of investors in the state are now selling their properties annually, compared to just 6% across the rest of Australia. This trend has already resulted in around 5,000 more investors exiting the Victorian market since the first wave of tax hikes began 18 months ago.

Industry data highlights a worsening climate for investors in Victoria. The state recorded a 3% drop in house prices in 2024, the only state to do so, with most sales occurring in inner-city areas like Docklands. Additionally, distressed property sales in Victoria were up 5.6% in October, far above the national average increase of 3.3%. Lending for investment properties has also hit the lowest levels among major markets.

The broader impacts could reshape the market in unexpected ways. While first-home buyers may be benefitting from reduced competition and softer prices, lower construction and reduced investor activity could spur housing shortages, driving up rents and property prices in the long term. Industry forecasts predict up to a 5% price drop in 2025, creating mixed outcomes for different segments of the market.

Source: The Australian, VIC Gov