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{{propApi.successMessage}} {{region}} Change locationTaxes on housing suppress market confidence
Taxes on housing suppress market confidence
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HIA released its Economic and Industry Outlook report. The report includes updated forecasts for new home building and renovations activity nationally and for each of the eight states and territories.
“In addition to the 37 per cent of the cost of a house and land package in Melbourne that is attributable to government, new imposts include a windfall gains tax of up to 62.5 per cent, a land tax surcharge for Victorians with more than one home, and inflated costs associated with ongoing changes to the National Construction Code,” added Mr Ryan.
“These additional taxes and regulatory changes have added to the uncertainty created by rising interest rates and will see the recovery in home building in Victoria delayed until 2025. Most other states have already reached or passed their expected troughs.
“The 2024/25 financial year is expected to mark the trough in the cycle for Victorian detached housing, with only a marginal improvement in 2025/26. This would conclude the three weakest years of the decade for Victorian detached house commencements.
“Higher density housing development is even more constrained. Commencements of multi-units are down by more than 40 per cent since 2015, with 2023/24 concluding the two weakest years for the sector since 2011/12. Activity is not expected to truly gain steam until the second half of 2025.
“There is significant upside potential to home building in Victoria if policymakers address the constraints on the industry.
“This means not imposing new taxes and regulations on the industry and abolishing the punitive taxes imposed on the very investors that are so crucial to building new housing. Some of these taxes perversely cost tax revenue in terms of lost construction activity, productivity and economic growth.
“Land shortages in Victoria are more acute, making land less affordable, than in almost any other jurisdiction. Land must be fast-tracked and made shovel-ready more rapidly in the coming years.
“In a major global city like Melbourne, higher density housing development in existing suburbs, close to jobs and transport, also needs to do more of the heavy lifting. The Victorian government has made clear its desire to see more higher density housing but it must help restore consumer confidence in the quality of this kind of development.
“Governments must also ensure sufficient infrastructure to accommodate higher density housing and address local resident and Council objections and obstacles to such development.
“The Australian government must streamline visas for in-demand trades so projects can be completed on time and on budget, otherwise large apartment projects will struggle to even commence.
“As policy currently stands, the kind of home building numbers that would produce markedly more affordable housing in Victoria is not part of our forecasts,” concluded Mr Ryan.
Detached houses: Victoria commenced construction on 8,310 detached houses in the first quarter of 2024, up by 3.9 per cent on the previous quarter. Another 8,120 houses are forecast to have started construction in the June Quarter 2024, down by 2.3 per cent. This would bring the financial year total to 32,320, 9.3 per cent down on the previous year. A trough of 29,040 is forecast for the 2024/25 financial year, with only a marginal improvement to 30,270 in 2025/26. This would conclude the three weakest years of the decade for Victorian detached house commencements, reaching a peak of 33,250 by 2027/28.
Multi-units: Victoria commenced construction on 5,710 multi-units in the March Quarter 2024, up by 13.6 per cent on the previous quarter. The June Quarter 2024 is forecast to have seen a 6.9 per cent decline back to 5,320, bringing the 2023/24 financial year to 21,430, a 10.5 per cent improvement on the 14-year low produced in 2022/23, though still historically low. A modest 2.9 per cent improvement is forecast for 2024/25, before accelerating towards a peak of 31,680 by 2026/27, and sustaining 30,880 in 2027/28.
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