Victoria’s Housing Crisis: 20,000 Rental Properties Vanish in One Year

Victoria is currently facing its most severe rental stock decline since 1999, as investment properties are being sold off rapidly.

Recent data from the Department of Families, Fairness and Housing shows a significant drop in active rental bonds, decreasing from over 676,400 in June 2023 to around 654,700 by mid-2024.

This signifies a reduction of 21,700 rental properties available, marking two consecutive quarters of rental bond declines, a first in the state.

Ben Kingsley, founder of Empower Wealth and chair of the Property Investors Council of Australia, attributes the crisis to taxation and tenancy reforms introduced by the Labor government.

He argues that these measures have deterred private investment and led to a scarcity of rental properties.

“The result is fewer rental properties, higher rents, and less private investment,” Kingsley said on X, adding that the renters who were meant to benefit from these policies are now bearing the financial burden of soaring rent prices due to lower supply.

The Urban Development Institute of Australia (UDIA) recently released a report echoing these concerns, pointing to Labor’s “excessive taxation” as a primary driver of Victoria’s property woes.

Since 2014, Labor has introduced 55 new or increased taxes, many of which directly impact the property sector.

The 2024-2025 State Budget forecasts that property taxes alone will generate $21.5 billion—almost half of the state’s total tax revenue.

Among the most controversial measures are the Vacant Residential Land Tax, the Windfall Gains Tax, and the removal of off-the-plan stamp duty concessions.

According to the UDIA, these policies have significantly dampened development activity, leading to higher costs for both buyers and renters.

The UDIA report highlights the negative impact of removing the off-the-plan stamp duty concession in 2017, which resulted in a 33 percent decline in apartment sales and a $924 million revenue loss for the state the following year.

This contraction in development has exacerbated the housing shortage, particularly in Melbourne, where the rental vacancy rate has hit a historic low of 1.3 percent. Unless urgent tax reforms are introduced, the UDIA warns that Victoria’s new apartment development from 2022 to 2027 will only amount to half of what was produced between 2016 and 2021.

Political Responses and Industry Reaction

Shadow Treasurer Brad Rowswell has criticized the government’s approach, stating, “Labor needs to stop treating those who seek to invest in Victoria as their personal ATM. These excessive taxes are pushing up housing costs for all Victorians.”

His concerns are echoed by Shadow Minister for Planning James Newbury who pointed out that 29 of the 55 new taxes imposed by Labor have targeted the property sector.

“It’s no surprise that Victoria’s housing sector is going backwards,” Newbury added.

In addition to taxation, tenancy reforms introduced through the Residential Tenancies Act 2021 have also been blamed for discouraging investment. The Act, which includes strict rent controls and tougher eviction rules, has made it less attractive for property owners to rent out their homes.

Coupled with the Windfall Gains Tax—which imposes up to a 50 percent levy on property value increases due to rezoning—investors have increasingly opted to sell their properties rather than continue renting them out.

A report from the Property Investment Professionals of Australia (PIPA) 2024 Annual Investor Sentiment Survey supports these claims, noting that around 22 percent of Melbourne’s property investors have sold at least one rental property in the past year, the second-highest rate in the country.

The sell-off is not limited to urban areas; regional Victoria also saw significant divestment, with over 9 percent of investors selling properties, second only to New South Wales.

Rental Market Impact

While this sell-off has benefitted prospective homeowners, allowing them to capitalize on falling property prices, it has significantly worsened the rental market.

PropTrack’s September 2024 data shows the national median rent has risen to $610 per week, up 1.7 percent from the previous quarter.

In capital cities, rents have climbed to $640 per week, while regional rents have reached $540 per week, reflecting a 1.9 percent quarterly increase. Despite the slight easing of price growth, rental costs remain at record highs, putting additional financial pressure on tenants.