Taxes on property now represent approximately 45% of the State Government’s taxation revenue and 15.5% of its total revenue, according to the Victorian Government’s 2017-18 Budget.

“The property industry continues to underpin the State’s economy here in Victoria. The question is, what is the State Government doing to re-invest that money back into the housing market?

“It’s very important for us to look at how all this money is being spent. The Budget includes some good infrastructure projects; in particular the funding for the land acquisition of school sites in growth areas. However there’s still a lot of tax being collected from the property sector that’s not being used,” said Danni Addison, Victorian CEO of the Urban Development Institute of Australia (UDIA).

According to information released with the 2017-18 Budget, less than 4.5% of the money collected under Government’s Growth Areas Infrastructure Contribution (GAIC) scheme has been spent since its introduction in 2010. Of that, approximately 34% has been allocated to the SRO for administration with an additional $226,602 invoiced.

“When it comes to spending the tax revenue being collected through GAIC, the Government is still behind the mark and has not shown any signs of real spending commitment.

“In this year alone, the Government expects to collect $175 million. That’s a big honey pot of money being collected but not being spent in the communities who are footing the bill.

“It’s time the State Government started to take the growth areas seriously by spending the money on key infrastructure items like roads and public transport which will unlock opportunities for the people living in Melbourne’s fastest growing communities,” said Ms Addison.

Government’s Homes for Victorians strategy is the only core plank in the 2017-18 Budget to address housing affordability.

“What this tells us is that State Government’s stamp-duty changes for first home buyers and investors will be its primary solution to the housing affordability situation here in Victoria.

“This is a real cause for concern as the Homes for Victorians strategy is extremely flawed.

There are three main unintended consequences that UDIA sees with the stamp duty changes, each associated with skewing the supply/demand balance and therefore negatively impacting upon housing affordability.

  1. Impact on house prices

“The demand for houses in Melbourne’s growth areas and established suburbs will increase but supply will not, which will drive up house prices rather than making them more affordable,” said Ms Addison.

  1. Impact on rental affordability

“A decline in investors purchasing and leasing out new housing will limit rental supply and push up prices for renters,” said Ms Addison.

  1. Impact on new housing supply

“If the number of investors purchasing off-the-plan properties decreases, so will the supply of new housing, pushing up costs for home buyers,” said Ms Addison.

Urban Development Institute of Australia (UDIA) – Victorian Division

The Urban Development Institute of Australia (UDIA) is a nationally recognised advocacy body that supports Australia’s urban development industry. The UDIA informs and engages government, key policy makers, and industry members, enabling better policy and better business decisions.

 

With a primary focus on the residential property sector, UDIA’s Victorian Division protects and promotes over 50,000 individuals from over 350 member companies across the state. UDIA members are property developers, consultants and a range of other professionals involved in producing, financing and marketing residential property.

 

Victorian State Budget 2017-18

Key Changes Affecting Victoria’s

Urban Development Industry

Key Points

  • No new taxes or increases to tax rates
  • $75 million allocated for the acquisition of land for nine new school sites within the growth areas
  • Seven of the nine new schools to be constructed are located within the growth areas
  • Unintended consequences of the Homes for Victorians package largely ignored. Removal of off-the-plan concessions for investors will be implemented from 1 July 2017
  • Additional $4 billion in transport investment, adding to the $30 billion in new transport projects invested by the government

Victorian Economic Overview

The 2017-18 Victorian State Budget will deliver an estimated operating surplus of $1.2 billion, and an accumulated surplus of more than $2.4 billion over the forward estimates.

Taxes on property now represents approximately 45% of the State Government’s taxation revenue and 15.5% of its total revenue.

Employment growth will strengthen with the unemployment rate standing at 5.9%.

Population is growing at a rate of 2.1 per cent a year, the strongest growth rate in the nation.

Net debt as a proportion of the economy is expected to be 6% of GSP by 2020.

Property Taxation

Taxes on property now represents approximately 45% of the State Government’s taxation revenue and 15.5% of its total revenue.

Land Transfer duty

Land Transfer duty (stamp duty) remains the largest property tax revenue source, representing 63% of the revenue from property taxes and 9.7% of total revenue. Stamp duty revenue for 2017-18 has increased by 2.4% from 2016-17.

Stamp duty forecasts are envisaged to be below trend end the near term before a return to trend by 2019-20.

This is largely due to macroprudential regulation measures such as:

  • Restrictions to lending at higher loan to value ratios, extended terms, and interest only loans;
  • Increased evidentiary requirements for foreign loan applications;
  • 10 percent speed limit on the growth of credit to investors from authorised deposit institutions; and
  • Increased capital requirements for Australian mortgage exposures.

 


Growth Area Infrastructure Contributions

2017-18 budget estimates $175 million in GAIC revenue and an additional $579 million in the forward estimates to 2020-21.

According to the 2015/16 VPA Annual Report, only 4.31% of GAIC has been spent ($7,586,206). Of that, approximately 34% has been allocated to the SRO for administration with an additional $226,602 invoiced.

According to that report, $171,751,281 of unspent GAIC was remaining. $29,451,693 sitting in consolidated revenue, $60,748,324 in the Building New Communities fund and $65,239,908 in the Public Transport fund.

The 2017/18 State Budget only identifies the following projects to be funded by GAIC:

  • Mernda Rail pedestrian overpass;
  • Merri Creek Park;
  • Land for new ambulance stations at Pakenham, Mernda, Taylors Lakes, Wyndham Vale, Melton and Cragieburn.

More focus for the GAIC funds need to be on enabling infrastructure projects that will bring more housing projects to market and provide new communities with better access to jobs, services and amenities.

Land Tax

Land tax revenue is expected to decrease by 5.3% to approximately $2.4 billion following growth in the previous year as a result of biennial revaluation process.

Land tax revenue is forecast to be $92 million a year higher on average from 2017-18 to 2019-20 reflecting the strength of the property market and an update to the revaluation estimates.

Planning

  • $12.5 million to continue implementing Plan Melbourne
  • $15 million to the Geelong Authority and Revitalising Central Geelong Action Plan
  • $5 million boost to the Living Heritage Program
  • $10 million invested in Fishermans Bend
  • $11.6 million to establish Land Use Victoria
  • $6.55 million to deliver the Yarra River Action Plan

Suburban Investment

  • $201.9 million to upgrade busiest train stations.
  • $35.8 million for upgrades to intersections, including Springvale Road/ Governor Road intersection.
  • $192.2 million to build 9 new schools in Aitkin Hill, Alphington, Burnside, Pakenham, Preston, Sanctuary Lakes, Taylors Hill, Truganina East and Yarrabat Park.

 

Growth Suburbs

  • $700 million for the M8 Ring Road upgrade
  • $300 million for Mordialloc Bypass
  • $100 million for the North East Link
  • $96.6 million for stage 2 of Yan Yean Road.
  • Western Suburbs Roads Package to be rolled out. Maintaining 700km of road and significant upgrades to key arterial roads.
  • $70.5 million to acquire land for additional nine schools in growth areas such as Clyde, Beveridge, Cranbourne, Cragieburn South, Eynesbury, Officer, Greenvale, Epping North and Wyndham South.
  • seven of the nine new schools are located within the growth areas.
  • $50 million over two years for the Growing Suburbs Fund.

Regional Investments

  • $4 billion specifically allocated to the regions. Including the following:
  • $1.12 billion in regional public transport. This includes, $316.4 million on maintenance to the network and $311.1 million for 39 more regional train carriages.
  • A $1.5 billion Regional Rail Revival plan, including $435 million to be invested in the Gippsland Rail Upgrade.
  • $530.6 million to maintain and upgrade regional roads and bridges. This includes, $49.2 million towards regional road upgrades for future growth, 40.8 million to upgrade and strengthen bridges, and 10.2 million for the Shepparton Bypass.
  • $50 million to double the First Home Owner Grant in regional Victoria.
  • Reduction in the payroll tax by 25% for businesses substantially operating in regional Victoria.
  • $45 million to improve digital connectivity.