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The governments of Western Australia and Victoria provide a stark contrast in how to address the chronic rental shortage that is afflicting both states – and every other part of Australia.

WA has adopted the enlightened approach of providing encouragement and incentives for people to buy properties in Perth and make them available for long-term rental – which is the only viable way to solve the shortage problem. 

Victoria, on the other hand, has decided to punish investors for being investors. You could almost believe that the politicians running Victoria believe property ownership is a criminal activity.

This may help to explain why property investors are heavily focused on buying in Perth and key WA regional markets, while investors are more likely to be selling than buying in Victoria. 

The difference is that WA has introduced measures to encourage investors in that state.

One targets those who own a property used for short-term letting, such as Airbnb, with a cash incentive from the State Government to convert to long-term rental for permanent tenants.

Another WA initiative is to encourage property owners to build granny flats to increase dwelling supply, increase urban density and slow urban sprawl.

The relaxed amendments to the state’s Residential Design Codes will boost housing supply by removing the minimum lot size requirements for an ancillary dwelling, commonly known as a granny flat. 

The alternative housing type will no longer require council planning approval and can be constructed on any property lot size. The key stipulations are that new dwellings will need to meet setback requirements and must not exceed 70 square metres in size.

In a further measure to increase dwelling supply, the WA Government is offering residential builders interest-free loans to help them complete unfinished properties.

The Builders’ Support Facility will provide interest-free loans to support eligible residential builders to complete new homes that have been under construction for more than two years.

All of that makes a lot of sense. It adopts the approach of encouraging people to take desired actions by offering incentives. 

The opposite approach is to financially punish people who don’t do what politicians want, even though the actions by property owners are legal and perfectly reasonable.

And that’s the approach taken by Victoria, which has the worst State Government in the nation, although there are plenty of others doing their jobs poorly.

In Victoria, if you’re a property investor, you’re treated on a similar level to drug dealers and mafia figures.

If you own a block of land and haven’t built on it yet, you’ll be punished with a new tax.

A new vacant residential land tax will apply right across Victoria from next year.

If you own any type of investment property, you’ll pay considerably more in land tax, with the State Government lowering the threshold so that everyone who owns an investment property will be slugged with land tax this year.

The Victoria government has also doubled the absentee owner surcharge starting from January this year.

There are also changes to the rules about building new homes in Victoria, which will add an estimated $40,000 to the cost of building the standard new home.

There’s also a windfall gains tax, which means that if you own land and it grows in value, you’ll be slugged with a major tax bill.

And if you’re brave enough to buy an investment property in Victoria, you’ll pay more in stamp duty.

State politicians have attempted to characterise these measures as “incentives” but they’re the opposite of that – they’re punishments.

So what are investors in Victoria doing? They’re selling up and getting out, in droves. 

It means that the chronic rental shortage in Melbourne and other parts of the state is going to get immeasurably worse.

And it’s already serious.

We’re seeing single people in particular being squeezed out of the state’s rental market — and with social housing being inundated with growing demand — there are fears this cohort is being pushed closer to homelessness.

There are now close to 50,000 single-person households on the state’s social housing waitlist — representing 85% of all new applications.

A new report from the Community Housing Industry Association has revealed for every single person they house, Victoria’s social housing waitlist receives another two new applications from individuals.

It’s going to get worse in Victoria, as more and more investors sell up, and fewer and fewer new investors buy in, thereby further reducing the pool of homes available for rental.

And it’s all caused by the nation’s worst state government.

In contrast, in Perth and WA, the situation is likely to improve because investors there are being encouraged and incentivised, rather than treated as a criminal class as they are in Victoria.


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