Changes to land tax and the introduction of a windfall gains tax will drive stability in the Victorian housing market, according to Victorian economics research group Prosper Australia.

Prosper advocacy director Karl Fitzgerald says the property lobby’s outcry is the reaction of an industry group caught with its hand in the honeypot, profiting from rezoning, minimal land taxes, poorly enforced vacancy taxes, alongside land values rising in the billions – virtually each and every year.

“These changes are a drop in the ocean for an industry that had billions of public money thrown at it during the pandemic through Job Keeper, Job Seeker, land tax discounts and rental relief.

“Victorian residential land values increased by $135.6 billion during 19-20. Even commercial property, which faced stronger headwinds during the pandemic, saw land values rise by $6.6 billion over the year. If we were to multiply such gains over four years, the property tax increases seem quite reasonable in light of such large returns.

“Sharing the load via higher land taxes and stamp duties is commensurate with rebuilding an economy that was brought to its knees by the pandemic,” he said. “Government investment in growth-boosting infrastructure also boosts land values – disproportionately benefitting landholders.”

“The speed with which property has accelerated out of lockdown is alarming. No other industry enjoyed such a rapid rebound on the back of government support.

“The higher land prices go, the more is needed each time we have a major crisis. With the covid crisis hitting after we’ve barely recovered from the GFC, it’s a reminder that the boom-bust nature of property is a cost borne upon the entire society. With great rewards, comes great responsibility.

Prosper Australia advocates for a fairer tax system, where reward for effort is encouraged over and above speculating on scarce assets.

“Land tax is a much more efficient way of taxing the property market. It improves turnover of property and encourages more efficient land use, penalising those who use “land banking” as a profit making strategy. The move to tax rezoning windfalls is long overdue. Both moves will take some of the speculative heat out of the market, improving stability.”

The annual Speculative Vacancies report reveals thousands of properties in Melbourne lying empty each year, with the most recent finding 69,004 (2019) empty properties in Melbourne alone.

“The higher land tax would have the effect of pushing some of these top end vacancies back onto the market. Rather than sitting on property and waiting for prices to rise, owners are forced to lower rents or sell, or pay for the privilege of speculating on the property market at the expense of renters.”

Fitzgerald says with 69,000 more rental properties in the market, tenants would have many more options to move if landlords tried to pass on the land tax.

Photo by Robert Harkness on Unsplash