Media release | Boom (Bank) Crash – potential impacts on real estate investment as a result of the Victorian Government’s State Budget

Gadens expects an immediate rush of real estate activity following the Victorian Government’s State Budget announcement on Tuesday, before it falls off a cliff.

Brihony Boan, Gadens Partner and Real Estate Sector Interest Group Leader urged the Government to consider the distortive effects of the proposal, and the short-term impacts and long-term challenges ahead for property owners.

“The implementation of the ‘property tax’ as proposed in the Victorian State Budget is likely to lead to a rush of transactional property activity prior to 1 July 2024 to lock in lower long-term holding costs, then activity will fall off a cliff.  

“There is an increased likelihood of land banking, which is counter-productive to driving economic activity and development across the State, and against the stated aim of unlocking land, particularly for commercial and industrial property and development.

“We also have concerns as to the short-term impacts on valuations, as the bringing forward of transactional activity generates a ‘bump’ in, and skews, valuations, which will be solely as a result of these proposed changes.”

Peter Poulos, Gadens Tax Partner expects the Government is happy to bank the uptick in duty revenue but is not prepared for the complexities that it has set.

“The reform is a tax hike shock. The first purchaser after 30 June 2024 will bear both the 6.5% duty and the impact of the new perpetual 1% land tax after 10 years. The question is whether this leaves Victoria as an unattractive destination for property investment over the medium term.”

Gadens is continuing to consider the short, medium and long-term impacts on its institutional, landlord and developer clients across all asset classes as a result of the proposed ‘property tax’. Please reach out to us if you want to be part of the discussion. More to come.