Garden State suffering falling prices, poor confidence, restrictive tax regime
NAB’s outgoing chief economist Alan Oster expressed little in the way of optimism for the Victorian housing market during Tuesday’s Commercial Broker Economics Update.
Victoria "is not doing well," Oster said, noting that the Garden State has the lowest confidence and highest unemployment in Australia, while house prices continue to trend negatively.
On the impact of Victoria’s land tax regime, Oster said the result is people are simply avoiding the state’s property market.
“If you suddenly inherit your family home… you’re also inheriting a $60,000-a-year land tax bill, so you sell,” said Oster.
Former Victoria Treasurer Tim Pallas drew the ire of property investors when, in late 2023, he announced an expansion of taxes on vacant residential land. The expansion came into force this January.
While Premier Jacinta Allan recently introduced stamp duty concessions in the state, this has done little to instil confidence in Oster.
“Victoria is a problem and I don’t see an easy out,” he said. At least not within the next three to five years.
With a 15-16% vacancy rate, things don’t appear much better in the Victorian commercial property space.
Oster hinted that NAB’s upcoming national commercial property survey (due next week) will be “slightly positive” for the first time in a while, even for the struggling office space segment. However, “it’s a lot better outside of Victoria than it is in Victoria”.
Breaking with historical trends, Oster suggested the renting slice of the Australian property market is dragging down the sum of the parts.
He said: “Normally it’s the third that’s in the mortgage (market) that causes all the grief; this time, it’s the rent, plus the mortgage.”
A January report from PEXA Group showed that rental bonds in Victoria fell in 2024, confirming reports of investors exiting the market.
The Reserve Bank of Australia (RBA)’s warmly received decision to knock 25 basis points off the cash rate “is not going to do a lot of things straight away”, said Oster, though “eventually” the positive effects will begin to materialise.
