2023-24 Victoria Budget: A Catalyst for Rent Increases
2023-24 Victoria Budget
We know that government budgets drive economic policies and welfare services but, at the same time, can create unforeseen outcomes. After the release of the 2023–24 Victoria Budget, concerns were raised regarding its impact on rental prices.
Let me explore and try to find what is in the 2023–2024 Victoria Budget that may further increase rent here in the state.
Property Values and Investments in Infrastructure
The Victorian budget has proposed major infrastructure investments toward the improvement of public facilities, transportation infrastructure, and urban development. While such developments are no doubt good for the state’s general development, they also tend to stimulate real estate value growth. Such increased property values often attract more interest from tenants, thus pushing up the cost of rentals as more prospective users bid for better locations with better infrastructure and services.
Reforms on Land Taxes
One of the major facets of the budget that influence landlords is land tax rule changes. Earlier, people started paying land tax after they went beyond $300,000. However, the same budget has cut this up to $50,000. This would mean most of the landlords will fall under this category as well. Some of the landlords had never paid land tax before, so this is something new coming their way.
Current land tax rates:
| Total taxable value of land holdings | Land tax payable |
| < $300,000 | Nil |
| $300,000 to < $600,000 | $375 plus 0.2% of amount > $300,000 |
| $600,000 to < $1,000,000 | $975 plus 0.5% of amount > $600,000 |
| $1,000,000 to < $1,800,000 | $2975 plus 0.8% of amount > $1,000,000 |
| $1,800,000 to < $3,000,000 | $9375 plus 1.55% of amount > $1,800,000 |
| $3,000,000 and over | $27,975 plus 2.55% of amount > $3,000,000 |
The Victorian government has adopted changes in land tax policies whereby new financial liabilities will accrue to land investors. Landholdings worth $50,000–$100,000 will incur the levy of $500; landholdings with valuations between $100,000 and $300,000 will face charges of $975, while landholdings above $300,000 valuation will be affected by an additional 0.1% of a tax on total land valuation.
These added financial burdens may make some real estate investors leave the market or delay buying properties. This has sparked a lot of debate on how the proposed tax changes would affect the housing market. Most people believe that it would reduce the already low supply of available dwellings, thus making the competition in the rental market stiffer.
Many people feel that this would even further compress the already scarce supply of available dwellings, thus creating more competition in the rental market. There will likely be fewer rentals available and perhaps rents that are a little higher in Victoria as a consequence; the problem of housing for tenants will thus become worse.
Reduced Funding for Rental Affordability Programs
Budgets allow rental affordability programs that support low-income families in getting access to affordable housing. In the 2023–24 Victoria budget, such initiatives might face a reduction in funding due to the limitation of budget or a policy change. The decrease in resources provided to rental affordability worsens the shortage of housing. With few subsidised rentals, tenants compete for these and, as a result, the rentals increase.
Market Sentiment and Investor Confidence
Budget announcements can largely impact market sentiment, and thereby investor confidence can be seen. If an unfavourable or bringing uncertainty perspective is given to this 2023–24 Victoria budget, then enthusiasm among the investors in regards to properties may get muted. Once the investor-related activity levels decline, thereby reducing their supply of available rentals, largely from investors constituting major parts of a rental stock, the limited stock can also only add to price pressures moving upwards.
