In case you missed this pearler of headline, Victoria has been branded as the worst state to have an investment property. What a load of S%$… rubbish!
But I’ll take any opportunity to highlight the incompetencies of the Andrew’s government, so let’s look at what’s unfolded over the past few years and why the perception is that Victoria isn’t ‘The Place to Be.’
It’s no wonder that Victorian investors feel like the piñata at the State Government’s Birthday party. Getting whacked repeatedly, blow after blow, whilst the birthday boy collects all the treats. Legislation changes. New land tax thresholds. Repeated threats of rent caps. Side deals with the Greens. The constant blows against everyday mum and dad investors who house 90% of renters feel relentless.
The legislation changes kicked off the ambush. There is no doubt in my mind that the introduction of the 130-plus reforms that now form part of the RTA Act in Victoria has more than dulled the eagerness of investors to hold onto their investment properties in this great state. Yes, some of these reforms were essential and, but these extensive changes have made holding an investment property in Victoria stupidly complex and costly. And worse yet, a key contributing factor to our property shortage and rent increases!
If you were still an investor who made it through the shitstorm of COVID and survived rent reductions, moratoriums, vacancies, and job losses, then you survived to battle against law reforms.
Investors had two options. Comply and adapt to the extensive changes OR bow out of the investor market entirely.
It seems a few investors chose the latter because, according to REIV, the total number of properties available for rent in March 2023 was down 21.8% at the same time in March 2020.
And then, if all that wasn’t enough, the latest blow to the piñata was the COVID-19 debt repayment plan that saw changes to the land tax threshold, further adding costs to investors.
So, with all this in mind, let me tell you why I think Victoria is STILL the place to be.
- Not even a pandemic can slow the growth in this state. Regardless of what’s thrown at us, we are still on track to have Melbourne crowned Australia’s largest city by 2030! That’s a year earlier than anticipated!
- It took Melbourne just one year to shake off the ‘pandemic blues’ and return to being the world’s third most livable city. In the WORLD, people!!
- Even in a time when Melbourne was the most locked-down city in the world, our research consistently led us here as the most opportune place to invest and despite the current noise, it still is.
- Property supply in Melbourne is extremely low, demand is high, and will remain high. Why? Because people want to live here!
Now, I’m not one to blow my own trumpet, but here’s a little article I wrote (most likely whilst in a lockdown) about how we knew Melbourne would bounce back. Despite Melbourne recording the longest stretch of rising rents for the seventh consecutive quarter, it remains one of the most affordable cities. Further strengthening the continued demand.
People want to live here, and that’s clear, as Melbourne continues to record the fastest-growing population.
I’m not ignorant that holding costs in this state have increased, but I have great comfort that these costs will be largely offset by the increased rents we are already seeing (20% YOY) and there’s still more to come.
Speaking with Gavin, Blue Wealth’s Senior Research Analyst, his opinion of investing in Melbourne is a solid one. ‘The fundamentals of Melbourne don’t lie. Melbourne is a city that has consistently performed and remains relatively affordable. Owning and holding an investment property there makes all the sense in the world.’
In time, the benefits of remaining or entering the Melbourne market will see strong capital growth, which is the long-term goal.
The minor deterrents like law reforms and increased holding costs will eventually filter through all states, with NSW next in line for the overhaul as they appoint their first Rent Commissioner, so take solace in knowing that you have invested (or will) in one of the most resilient cities in the world. No amount of pinata-whacking is about to change that.