Is Victoria the Worst State in Australia for Investment?

Approximately 25,000 rental properties were removed from the market in 2024. Why?

Firstly, additional taxes imposed on investors is a big factor. The most significant being a substantial increase in land tax, which now applies to virtually all rental properties with the trigger value now being $50,000 land value. Combined with multiple rounds of additional compliance obligations on rental providers (landlords), including longer notice periods, eviction and bidding bans from later this year, the incentive to own investment properties has plummeted.

In early 2027, owners will be required to have air conditioning in any property they offer for lease; we will have the bizarre situation in place where some owner will be required to have a higher standard for their rental than in their own home.

Next, values in Melbourne are increasing at the lowest annual rate of any capital city (PropTrack 1/7/25).

But all of this is now history, so where now?

There are signs of improvement, with the last quarter turning from a negative annual growth to a positive. Reduced rental properties means increasing rents. The general market has moved from a buyers’ to a balanced one. The two main factors are reduced stock levels (the investor sell-off has slowed from a flood to a trickle) and dropping interest rates.

But the question remains on whether Victoria offers more potential than other states for a return over time. Without a reduction in punitive taxes and/or a reversal of the mounting obligations on rental providers, the answer is, disappointingly, no.