Victorian government should give investors a fairer go and eliminate higher stamp duty rates for investors

In many parts of Victoria there is a shortage of rental homes and the only way the shortage will be fixed is if more individuals invest, i.e. buy housing for the sole purpose of providing it as rental accommodation.

The problem is that those who choose to do that face higher rates of stamp duty.

When the previous state government reduced stamp duty in 2007 it left the old higher rates in place for investors.

As a result, those who buy a house for the purpose of increasing the number of available rental homes pay a higher rate of stamp duty than they would if they were going to live in it.

The higher rate of stamp duty is in addition to the land tax, for which they are liable on an annual basis. It is not equitable to charge an investor land tax on the basis that the property in question is not their principal place of residence then charge extra stamp duty as well.

An investment home purchased for $400,000 is liable for $2,700 more in stamp duty than if it were purchased to live in. That is the equivalent of nearly five years’ worth of land tax.

Charging higher duty for investment properties can have two effects: firstly, it can act as a disincentive to individuals purchasing and providing rental accommodation; secondly, it can increase the cost of the accommodation to renters.

In the coming state budget the government should consider equalising stamp duty for all non-first home buyers.

Enzo Raimondo is CEO of the Real Estate Institute of Victoria.