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The long-discussed reforms and proposals that could affect property investors across Victoria may seem like a win for renters. However, the implications of the initiative are up in the air whether it’ll be a positive or a negative.
A recent episode of REB’s sister brand The Smart Property Investment Show delved into the changes that are likely to deter property investors across the state.
What’s culminated in something of a perfect storm, things like energy efficiency mandates, higher taxes for those with multiple properties, and increased minimal standards are sure to put pressure on landlords.
“You’ve got 133 reforms in the Tenancy Act, which has increased the compliance costs and the holding cost of the property. You’ve then got a windfall tax, which makes it more expensive for developers to build, which ultimately means that the land prices become more expensive, that ultimately gets passed on to the buyer. And now we’ve got this land tax,” commented chair of Property Investors Council of Australia, Ben Kingsley.
“So, we’ve got significant economic problems that are going to manifest themselves down here in Victoria. The political way to win this is to go after those who have versus hitting the ones who have not.”
Where investors luck out, renters stand to gain. The proposed energy efficiency mandates would see better heating and cooling for Victorian rental properties, raising minimum rental standards has been posed to lead to “more equitable quality of life”, and higher taxes on property investors could see more availabilities for first home buyers.
However, it’s not all positive for renters. In fact, some are arguing that the increased taxes for landlords could result in fewer rentals and increased rent.
Kingsley continued: “The rental bonds data that we collect here in Victoria was reported last week and it says that in the last 12 months, Victoria has lost over 15,000 rental properties in the last quarter alone. We’ve got over 10,000 less rental properties in Victoria. So, we are definitely going to see a situation whereby rents are going to continue to grow because we’ve now got a land tax which kicks in at a $50,000 land threshold, which is adding another 615,000 taxpayers paying land tax in Victoria.
“They’re also now seeking further feedback from the general public in regards to increasing their minimum standards. So now what they want to do, it couldn’t be worse timing, but they want us to now have insulation in the roofs and they want us to have to put all of door stops, that will stop drift of air … it really is inappropriate because all these additional costs, because rental vacancies are going to be so tight, the property owner is going to be able to pass on those costs.”
It’s up in the air as to whether the reforms will benefit or hurt renters. One thing is clear though – the future of property investment across Victoria will be tougher.
“So, make no mistake, whoever’s listening to this who’s pro tenant, the fact of the matter is, over the last 12 to 18 months, due to 13 interest rate rises, due to higher compliance costs, due to these land tax provisions, it’s become incredibly expensive to run your small business rental accommodation in Victoria. In most cases, most of us have only recovered about 25 per cent of those fixed costs,” said Kingsley.
“If we were a fish and chip shop or we were running some other type of small business, we would be out of business. We couldn’t just only pass 25 per cent of those costs on. So effectively, at the moment, a lot of property investors in Victoria are subsidising their tenants, but it’s going to get to a stage where they just can’t keep subsidising them. So ultimately, they are passing on those rental increases to the tenant.”
