Victoria’s housing market faces setback due to tax burden, HIA reports

The Housing Industry Association (HIA) has warned that new taxes on housing in Victoria are hampering market confidence and delaying recovery in new home building, despite strong underlying demand.

HIA Regional Director Keith Ryan highlighted the issue in the association’s latest Economic and Industry Outlook report.

“Tax imposts on housing have adversely affected market confidence and will delay a recovery in new home building in Victoria, despite strong underlying demand,” Ryan said.

The report reveals that government charges now account for 37 per cent of the cost of a house and land package in Melbourne.

Ryan cited additional taxes, including a windfall gains tax of up to 62.5 per cent and a land tax surcharge for multiple homeowners, as factors contributing to market uncertainty.

“These additional taxes and regulatory changes have added to the uncertainty created by rising interest rates and will see the recovery in home building in Victoria delayed until 2025,” he said.

According to the HIA, Victoria’s detached housing sector is expected to hit its lowest point in the 2024/25 financial year, with only marginal improvement forecasted for 2025/26.

The multi-unit sector is facing even greater challenges, with commencements down by more than 40 per cent since 2015.

Ryan called for policy changes to address these issues, including abolishing “punitive taxes” on investors and fast-tracking land availability.

“Land shortages in Victoria are more acute, making land less affordable, than in almost any other jurisdiction,” Ryan noted.

The HIA also urged the federal government to streamline visas for in-demand trades to ensure timely project completion.

Despite these challenges, the report forecasts a modest recovery in Victoria’s housing market, with detached house commencements expected to reach a peak of 33,250 by 2027/28, and multi-unit commencements potentially peaking at 31,680 by 2026/27.