Victoria has continued to underperform as a housing market despite the significant size of its economy and population, a new report by Australia’s peak body for the residential building industry has shown.
Each state and territory is ranked based on the performance of 13 key residential building indicators against their decade average.
According to the new ranking, Victoria was the fourth best state or territory for investors after South Australia, Queensland, and Western Australia.
While Victoria’s ranking improved from the seventh position half a year ago, the state used to be a leader in the housing sector in the 2010s.
The report pointed out a rapid drop in the pipeline of building work due to a reduction in home sales and commencements.
The multi-unit sector was also in bad shape while the state was over-reliant on overseas migration for population growth.
Keith Ryan, the executive director at HIA Victoria, blamed the state’s poor performance on its tax policy.
“Our housing industry should be performing much better but is being held back by bad tax settings.”
The director explained that the local home-building industry had been subject to new types and higher tax rates in recent years.
“These include the new windfall gains tax, an expansion of the vacant residential land tax, increases in land tax and stamp duty, increases in payroll tax, and more recently increases in Workcover premiums,” he said.
Victoria Taxes Housing Sector to Pay Off COVID-19 Debts
The sharp tax rise is linked to the Victorian government’s COVID-19 debt repayment plan.In response to the pandemic’s economic impact, the government implemented tax measures targeting large businesses and property owners to alleviate a $31.5 billion (US$20.5 billion) debt incurred by pandemic responses, including the world’s longest lockdown in the capital city of Melbourne.
The plan specifically targets large businesses and property owners whom the state government argues made huge profits during the pandemic.
While the HIA acknowledged that Victoria had a budgetary problem, the peak body believed the state needed to introduce a tax reform to restore the confidence of consumers and the sector.
“It is assumed that in this year’s Victorian state budget, there will be no positive tax reforms. This is a disappointing outcome,” Mr. Ryan said.
“But it will be even worse if we see a repeat of last year’s budget and following announcements with more new and increased taxes that can only discourage investment and make Victoria less attractive as a place to do business.”
