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2023-24 Victoria Budget: A Catalyst for Rent Increases

2023-24 Victoria Budget

As the 2023-24 Victorian Budget was recently revealed, concerns have emerged regarding its potential impact on rental prices across the state. Budgets play a vital role in shaping economic policies and public services, but they can also have unintended consequences. In this post, I’ll explore the key factors within the 2023-24 Victoria budget that may contribute to a further increase in rental prices.

Infrastructure Investments and Property Values

The new budget outlines substantial investments in infrastructure projects aimed at enhancing transportation, public amenities, and urban development. While these initiatives are crucial for the overall progress of the state, they also often lead to increased property values in the surrounding areas. As property values rise, the heightened demand from renters causes rental prices to increase.

Land Tax Reforms

One of the key aspects of the budget affecting landlords are the changes to land tax regulations. Previously, the threshold for paying land tax was set at $300,000, but under the new budget, it will be reduced to $50,000. This means that a larger number of landlords, including those who have never paid land tax before, will now be subjected to this additional cost.

Current land tax rates:

Total taxable value of land holdingsLand tax payable
< $300,000Nil
$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

In addition to lowering the threshold, the government has introduced additional charges for land tax. Landholdings valued between $50,000 and $100,000 will incur a fee of $500, while properties valued between $100,000 and $300,000 will face charges of $975. Moreover, properties valued above $300,000 will be subject to an extra 0.1% of their total land value.

The changes to land tax and has sparked debate whether it will force some investors to reconsider their involvement in the market or hold off from acquiring more properties. These additional costs may force some investors to exit the property market, which could contribute to further strain on the already limited supply of housing, exacerbating the challenges faced by renters in Victoria. As a result, the rental market could become even more competitive than it is today, with reduced options for renters, which will lead to rents increasing.

Reduced Support for Rental Affordability Programs

Budgets often allocate resources to rental affordability programs aimed at supporting low-income households in securing affordable housing. However, the 2023-24 Victoria budget might witness a reduction in funding for such programs due to budgetary constraints or policy shifts. A decrease in resources allocated to rental affordability initiatives exacerbates the existing shortage of housing options. With limited subsidized rentals available, tenants face increased competition, leading to rising rental prices.

Market Sentiment and Investor Confidence

Budget announcements can significantly influence market sentiment and investor confidence. If the 2023-24 Victoria budget is perceived as unfavourable or introduces uncertainty, it may dampen investor enthusiasm in the property market. A decline in investor activity can restrict the supply of available rental properties, particularly from investors who provide a significant portion of the rental housing stock. The resulting limited supply can only add to the upward pressure on rental prices.

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