The proposed levy on new builds in Victoria, announced late last week, has caused a stir among property players. The 1.75 per cent tax on new developments, which aims to fund social housing, will hike prices for first-home buyers, young families and downsizers, putting home-owning further out of reach for some.
So, what exactly are the parameters of this new tax?
It’s proposed, from July 2024, new builds with more than three dwellings – or three or more lot subdivisions in Melbourne, Ballarat, Bendigo and Geelong – will contribute 1.75 per cent of their market value to a Social Housing Growth fund.
The government predicts the tax will fund roughly 1,700 new social and affordable homes each year and boost construction to create more than 7,200 jobs. However, the tax will also significantly increase the already high cost of housing in Victoria, and this levy will likely just be passed onto the eventual buyer.
The property industry is the biggest provider of taxes to the state government. And rather than making it easier for people to do business within the industry, the state government is discouraging investors and developers by introducing, yet another, property tax. According to the PCA, this is the 10th new property-based tax introduced by the Andrews Labor government.
While it is crucial affordable and social housing is considered in government spending, a tax on new builds will hurt those who can only purchase at the affordable end of the residential market.