Victorian investors flee amid harsh regulations, leaving the rental market worse for wear
Landlords grapple with increased costs, including the COVID debt levy, 130 reforms, and rising interest rates, forcing sales. Image: Canva.
  • Harsh regulations prompt Victorian landlords to sell, leaving the rental market strained.
  • Investors struggling through cost-of-living crisis, interest rate hikes, and high taxes.
  • Influx of sales may mean more options for first-home buyers.

Property investors have been leaving Victoria en masse, pushed out by the increasingly harsh regulatory environment, leaving the already constrained rental market worse for wear, according to real estate agency Little Real Estate.

Investors at their wits end

Little Real Estate reported a surge in Victorian sales listings as investors exited the market, encumbered by the controversial COVID debt levy, further land taxes, and escalating maintenance costs.

“Our data shows more than 10% of properties are currently coming up for sale in Victoria, while just 2% and 7% are entering the markets in New South Wales (NSW) and Queensland, respectively, suggesting a shift of investor interest to other states in Australia,” said Little Real Estate executive general manager of property services, Anne Crarey.

Anne Crarey 2023
Anne Crarey. Image: Supplied

“In light of the current economic landscape, particularly with rising interest rates and new specific state government policies, property investors in Victoria are facing a unique set of challenges. These factors have made it increasingly difficult for Rental Providers to manage and hold onto their assets.”

COVID tax to harm Victoria’s rental supply

From the start of 2024, Victorian property investors will be subject to a new flat rate tax of up to $957, and an extra levy on their land’s value, under a new 10-year tax aimed at tackling the massive debt the state accrued during the COVID-19 pandemic.

Crarey told The Property Tribune that Victorian landlords were already struggling to cope with the cost-of-living increases and interest rate hikes. The further costs resulting from legislative changes and land tax have become the proverbial last straw.

“Landlords also have the additional financial burden of more than 130 reforms which came into effect in 2021 which we estimate to be up to $800 a year for the average property owner,” Crarey said.

“There is a view that if you can afford to have an investment property, you must be doing well.

“70% of landlords are Mum and Dad investors and 48% earn less than $100,000 a year so for them these additional expenses are enough to drive them out of the market.”

“Rental providers are mum and dad investors just trying to get ahead for retirement, for their children, and they just scraping through. What it’s doing is forcing people to sell, which means less homes in the rental market and increasing rents to renters.”

Anne Crarey, Little Real Estate

Indeed, Victoria’s rental market has reached historic lows of late. According to Little Real Estate’s data, their pool of rental properties has tumbled from 1000 in January 2021 to a mere 165 presently.

Melbourne residential vacancy rates

The hidden hardships faced by Mum and Dad landlords

Semra Selbik, a Victorian who owns a property in Hawthorn, spoke to The Property Tribune about the challenges she has faced owning a rental property in a state previously snubbed by industry bodies as being one of the most unfriendly to investors.

“As a landlord this experience has left me stressed and uncomfortable over the last seven years. I have had no option but to sell the unit due to keeping up with the constant rise of costs,” she said.

“Melbourne was the hub for buying property many years back. However, the constant lockdowns, extra costs and construction in units have left properties difficult to rent and sell.”

Selbik bought a property off-the-plan in 2016 with the goal of generating additional passive income. However, for the past four years, her property has been nothing but a source of stress, one that she’s struggled to sell for two years.

Additionally, she said that her exit from the rental provider market would likely be permanent

“The increased costs, especially for mandatory safety checks and property maintenance to comply with regulations, have placed a significant strain on landlords like myself.

“This financial burden makes it increasingly difficult for us to provide affordable housing.”

“I will not be considering purchasing another property in investments. I thought having a passive income would be beneficial over time in the future, but the experience has left me struggling to keep up with strata costs.”

Semra Selbik, Hawthorn Rental Provider

First-home buyers rejoice?

While the state of play in Victoria remains bleak for both renters and landlords alike, some may have benefitted from the influx of listings. With demand for Victorian properties falling and supply rising rapidly, first-home buyers have emerged as the ‘winners’ of this latest trend, enjoying less competition from investors.

Melbourne total property listings

“The current regulatory environment has led to a late surge in property listing this year, providing more options for first-home buyers. This shift in the market dynamics is reducing competition from investors, allowing first-home buyers a better chance at securing properties,” said Little Real Estate executive general manager of sales, James Kirkland.

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