Victoria Ranked Second-Worst State in Australia for New Home Investment

Victoria ranked 2nd-worst state for new home investment, with 'insane' tax changes by govt cited as a key factor. Urgent action needed to address barriers to new home construction and meet federal housing targets.

Geeta Pillai
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Victoria Ranked Second-Worst State in Australia for New Home Investment

Victoria Ranked Second-Worst State in Australia for New Home Investment

Victoria has been ranked the nation's second-worst state for investment in new homes, according to the Housing Industry Association's (HIA) nationwide Housing Scorecard. The HIA cited 'insane' tax changes by the Victorian government as a key factor turning landlords off from investing in new homes in the state.

Victoria's new home approvals are at 10- and 15-year lows, with investors walking away being a key part of the declines. The HIA Executive Director for Victoria, Keith Ryan, stated that Victoria's housing industry performance is 'mediocre' considering the size of the state's economy and growing population. Victoria was a leader in the Housing Scorecard in the 2010s but has since fallen to the middle of the pack, and is unlikely to improve in the foreseeable future.

The report cites factors such as falling home sales and commencements, a weak multi-unit sector, and over-reliance on overseas migration for population growth. Ryan noted that new and increased taxes, including the windfall gains tax, vacant residential land tax, and increases in land tax and stamp duty, have hit the home building industry in Victoria. "The best policy move for governments would be to work together to remove or dramatically reduce the reliance on stamp duty to rapidly increase new home construction," said an HIA economist.

Why this matters: The low ranking and declining new home investment in Victoria have significant implications for the state's economy, housing affordability, and the federal government's housing targets. With only 150,000 homes expected to be built nationwide this year, far below the target of 240,000, urgent action is needed to address the barriers to new home construction.

South Australia has retained its position as the nation's top-performing new home market, while Victoria and New South Wales are languishing. The HIA acknowledged that Victoria's budgetary position is poor, but stated that tax reform is necessary to restore confidence in the housing industry and make Victoria more attractive for business. At the current pace, Australia is on track to build just 150,000 new homes this year, well short of the federal target of 240,000 homes per year as part of a five-year 1.2 million new homes goal.

Key Takeaways

  • Victoria ranked 2nd-worst state for new home investment, per HIA Scorecard.
  • Vic's new home approvals at 10-15 year lows, with investors leaving the market.
  • Vic's housing industry performance 'mediocre' despite state's economy and population.
  • Taxes like windfall gains, vacant land, and stamp duty cited as barriers to new builds.
  • Australia on track to build 150k new homes in 2023, far below 240k federal target.