Victoria’s property market is lagging compared to the rest of Australia

 

 

Victoria’s loss is other states’ gains

 

Victoria’s property market is lagging compared to the rest of Australia, which may be explained by changes made during the Covid period. During this time many people left Victoria due to the severe restrictions and the geographic conditions that appeared to assist the spread of the virus. During that time and in recent years new harsher laws impacted rental providers and investing in Victoria’s property market seemed less attractive.

 

The lagging property prices in Victoria seem to reflect increases in the states Victorians fled to during COVID-19 – Queensland and South Australia. Several reasons could contribute to Melbourne’s lagging property prices. However, certain aspects seem more specific to Victoria even though many economic conditions are the same.

 

Victoria has experienced job losses, reduced consumer spending and tightened lending conditions like the rest of Australia but the property market in Victoria is not reacting like the rest of Australia. The distinct differences seemed to be having a dampening impact.

 

Regulatory changes

 

Government policies related to property ownership, taxation, or lending can directly influence the property market. For example, changes to stamp duty, capital gains tax, or lending criteria can impact demand and affordability, affecting prices. A new land tax for investors saw another exodus of investors choosing other states with lower stamp duties and more favourable tax incentives.

 

Government policies and regulations related to urban planning can vary between states and territories. Differences in policies, such as stamp duty rates, land release programs, or planning regulations, can affect supply dynamics and property prices differently in Melbourne compared to other states. Victoria appears more taxed and regulated than other states with the second-highest stamp duty in the country and tougher dual occupancy laws.

 

Market sentiment

 

Investor confidence plays a significant role in property prices. The negative sentiment due to geopolitical events, economic uncertainty, or other factors can lead investors to hold off on purchasing, putting downward pressure on prices. For example, many landlords’ chose Airbnb over new stricter tenancy laws. The government then introduced time restrictions for Airbnb(s). Many investors gave up, sold and reinvested in parts of Australia less hostile to rental providers.

 

Many of these changes were made during and post-COVID-19, arguably impacting Victoria’s attractiveness to investors. Indeed, many decided to sell and new investors are just avoiding Victoria.

 

Demographic shifts

 

The changes in population dynamics, such as migration patterns or shifting demographics, can affect demand for certain types of properties. During covid the price of housing was second only to NSW. Many people felt that the cost of staying in Victoria and the extra imposts on their quality of life was motivation to leave. This no doubt had a huge impact on the reduced demand for property.

 

External economic conditions

 

Victoria’s property market is also influenced by broader external economic conditions. Global economic slowdowns, trade tensions, or financial crises in major economies can impact investor confidence and capital flows, affecting property prices. There is a lot less building since covid and the costs have skyrocketed. With more rules and taxes many developers have chosen other states over Victoria.

 

Rental market dynamics

 

The rental market can influence property prices, especially for investors weighing rental yields. If rental demand weakens or rental yields decline, investors may become more cautious, impacting their willingness to pay higher prices for properties. Whilst the yields in parts of Victoria may still be attractive the ‘punishments’ imposed on rental providers are a deterrent and prices have been affected.

 

There is a fine line between stamping out unfairness and fostering investment. It appears the pendulum may have swung too far and is allowing other states to take investment away from Victoria. Perhaps when the other states become too expensive Victoria will pick up steam again.