Victoria slugs investors, helps first-home buyers: Terry Ryder

There’s plenty to like and lots to criticise in the housing measures announced by the State Government in Victoria.

Firstly, let’s be grateful for some progress on a difficult issue and acknowledge this factor: at last we have a state government willing to recognise that resolution of affordability issues lies within its own hands.

The standard political response to affordability problems is to point the finger of blame in other directions. All manner of culprits have been made scapegoats, including foreign buyers, Australian investors and migrants to Australians.

But the reality is that politicians lie at the heart of the problems. All three levels of government play significant roles in adding to the costs of building or buying dwellings – none more so than state governments.

So it’s refreshing to see Victoria taking some responsibility for this issue. It’s also heartening to see that Premier Daniel Andrews and his cohorts have recognised that simplistic solutions won’t make a difference. Rather, they have announced a multi-phased campaign to try to improve things.

Too much media time in the affordability debate has been wasted on people advocating single-pronged solutions, usually based on their own vested interests or on politically-motivated opinions that lack any substance or a basis in research.

The Victorian Government has announced a series of measures which address some, but certainly not all, of the factors wrapped up in the contentious issue.

It has taken steps in increase supply, both in Melbourne and in regional Victoria.

It has sought to encourage people out of the Melbourne market and into regional areas.

And it has addressed the stamp duty cost burden on first-home buyers, while also introducing a joint-purchase scheme to further assist first-timers.

There are plenty of issues it hasn’t addressed, especially the way in which government policies, taxes and charges had enormously to the cost of producing new homes.

That’s because it wants to make a difference without taking too much of a hit to the Budget bottom line. Like all state governments, it’s addicted to all that lovely revenue it rips out of the housing industry in taxes, fees and charges of various kinds.

So it’s found a way to slug investors while helping first-home buyers, so that it recoups from the former some of the revenue it loses by helping the latter.

It’s introducing a tax on investor properties left vacant for six months of the year, equal to 1 percent of the property’s capital-improved value. The idea is to force to owners to sell them or rent them out, thereby adding to the supply of homes. This won’t apply, apparently, to holiday homes or homes owned by people who move overseas temporarily.

It’s claimed there are at least 24,000 homes sitting empty in Melbourne because their owners prefer to keep them vacant rather than put in tenants. There’s a fundamental issue here that needs to be debated, based on the individual’s right to make decisions about their assets. 

The Government is also increasing housing supply through plans for 17 new suburbs with 100,000 home sites around the Melbourne metropolitan area.

The Government is abolishing stamp duty for first-home buyers of properties up to $600,000, with stamp duty discounts for those between $600,000 and $750,000. It will pay for them by removing the stamp duty exemption for investors who buy off-the-plan apartments.

It’s also increasing grants for first-home buyers in regional Victoria (new homes only) from $10,000 to $20,000. There aren’t too many rural locations with pressing affordability issues so this, it seems, is more about encouraging people to move to regional centres, thereby easing demand-supply pressures in Melbourne.

There’s also a new plan called HomesVic, whereby the government will co-purchase homes jointly with first-home buyers.

Many people would applaud those measures or most of them. They’re designed to help first-time buyers in various ways while slugging people who buy homes as investments.

But it’s an approach that fails to recognise the part investors play in lifting housing supply, providing a necessary pool of homes for rent and creating wealth to provide for future retirement. 

It also ignores the most pressing issue of the affordability situation: the part state governments play in inflating the cost of new housing. This government is, essentially, giving with one hand and taking away with the other – it’s providing grants, stamp duty concessions and other assistance to first-time buyers of homes which are expensive in the first place because of governments imposts on the dwelling supply process. 

If they had the political will they could make new dwellings considerably cheaper - and then those grants and concessions wouldn’t be so necessary.

Terry Ryder is the founder of hotspotting.com.au. You can  email him or follow him on Twitter.