Victoria has become the state that property investors don’t want to know about, because its politicians at both state and local level appear to have declared open season on investors.

The State Government in Victoria has a budget deficit problem and has made the decision that many politicians in Australia make, which is to resort to the housing market as their favourite cash cow.

They can’t slug home-owners or first-home buyers with new or higher taxes because that’s politically unpalatable – but investor owners are relatively few in number so they can attack them with less damage politically.

It will result in fewer investors, therefore fewer rental properties, and therefore higher rents for tenants, but hopefully (in the minds of the state politicians) tenants will blame their landlords rather than the government.

So the State Government in Victoria has smashed owners of investment properties in the state with big increases in existing taxes – notably land tax – and with the introduction of new taxes.

It’s almost as if they see investors as a criminal class and they all need to be punished.

If that isn’t enough, now the State Government has announced it will mandate the upgrade of a range of components inside rental homes

This would force landlords to install insulation, draught-proofing, cooling and heating systems and new shower heads – and the estimates for the cost impact of that range from $5,000 to $10,000.

Consumers Affairs Minister Gabrielle Williams, displaying the out-of-touch divorced-from-reality quality so common among politicians, says this is a relatively small cost for property owners to wear and won’t be a problem for anyone.

But for typical owners, an additional cost of $5,000 or $10,000 on top of huge increases in interest rates, insurance, maintenance costs and government taxes including land tax and council rates, this is a killer blow.

There is already an exodus of investors from Victoria because of the recent tax increases and this new imposition of enforced upgrades will compel many more to sell up and leave the state.

Veteran property commentator Jonathan Chancellor has described the Victorian State Government measures as “a lesson in what not to do” in the face of a rental shortage crisis.

He said that the state bureaucracy had admitted that Melbourne’s rental supply may contract as a result – keeping in mind that it’s already alarmingly low.

But it doesn’t end with this appalling state government. Local councils have already joined the increasingly popular political sport of demonising and punishing investors.

The Merri-bek Council, or elements of it, want to take the assault on property investors to a new level. The plan is to double council rates on investment properties and reduce rates for everyone else.

They say that, if it forces investors to sell and their properties are bought by owner-occupiers, that’s a great thing. In fact, according to the policy stated by the proponent, Cr James Conlan, that’s the main objective.

The logic, if you can call it that, is that it will make homes available for purchase by first-home buyers. But most suburbs in this LGA have median house prices well above $1 million. The three Brunswick suburbs are all around $1.3 million.

How many first-home buyers in Melbourne can pay over $1 million as their first foray into the property market.

It’s simply not going to happen.

But, beyond that, where will the tenants of these properties go? Who will provide the rental properties if the local council forces all investor owners to sell, which appears to be the ultimate objective of this appalling proposal.

Vacancy rates in the postcodes of Merri-bek LGA are well below the already-low Melbourne average – many of them have vacancy rates around 0.5%, which is at crisis levels.

Looking more broadly across the state, the number of homes occupied by renters in Victoria has fallen by 10,400 in just three months and 15,600 in a year.

Government agency Homes Victoria’s most recent rental report, from the March quarter, reveals that the number of new lettings has dropped 12% in a year.

The rental supply fall has coincided with a shortage of new homes being built, because of labour and supply constraints.

It also coincides with an increase in land taxes paid by landlords and follows 13 interest rate rises since 2022.

Australian Bureau of Statistics figures released earlier this month revealed that housing loans taken out by investors in Victoria were well below the national average amid an exodus of investors from the property market.

Ultimately, in the end, who are the biggest losers?

Well, it’s the people who rent their homes. There is going to be considerably fewer of them in Melbourne and other parts of Victoria and there will continue to be upward pressure on rents.

Unless, of course, someone is silly enough to implement a rental cap, which will cause even more investors to sell and create an even bigger rental shortage.

A rental cap is no use to you if you can’t find a place to rent at any price, because nothing is available.