Exploring the Market Lag in Victoria

For over a decade, Melbourne and regional Victoria have been stalwarts in Australia's residential property market. However, in a surprising turn of events post-COVID-19, while other regions are thriving, Victoria's market has experienced a significant slowdown, particularly in the past year.

According to data from the PropTrack Home Price Index released on May 1st, 2024, Melbourne's median dwelling value stands at $805,000, with an annual growth of just 1.1%. Similarly, the rest of Victoria shows annual growth of -0.91%, albeit a solid growth of 40.9% since March 2020.

In contrast, cities like Brisbane and Adelaide boast higher median prices, with annual growth rates of 12.82% and 13.99%, respectively, since March 2020. CoreLogic Australia's recent findings reveal a surge in new listings in Melbourne, tracking nearly 35% higher than the previous year, contributing to a total listing increase of approximately 13%. The four-week count of total listings in Melbourne sits at 29,744 properties in comparison to Sydney at 19,376, and Brisbane at 10,924. There is a similar story in Regional Victoria, with new listings up 39.4% from a year ago, at approximately 15%.

The current landscape prompts a deep dive into the various factors contributing to Victoria's underperformance, with a significant focus on the recent State Government tax hikes on residential properties, which have had a noticeable impact on the market.

  • From January 1st, 2024, the land tax threshold was changed to $50,000 for individuals and $25,000 for trusts. For properties with a land value of $100,000 to $300,000, this would attract a land tax bill of $975.
  • Introduction of vacant residential land tax from January 1st 2025, for all properties in Victoria where a property has been vacant for more than six months. This is calculated at a rate of 1% of the Capital Improved Value. Previously, the vacant residential land tax only applied to inner and middle Melbourne.
  • The short-stay property tax will take effect on January 1st, 2025, imposing a 7.5% tax on the revenue from short-stay accommodation.

These key tax changes are expected to impact market sentiment. Despite these challenges, long-term prospects remain favourable, buoyed by robust migration and population forecasts, alongside an ongoing housing under supply.
While storm clouds loom over Victoria's property market, there is a glimmer of hope. The potential for a rebound, fuelled by underlying fundamentals, offers a promising outlook for sustained growth in the years ahead.

Mike Henderson
Group Executive Director – Residential Operations
— Brisbane Property Valuers
  |  LinkedIn
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