New tax will hurt Victorian home buyers

The Victorian Government will introduce a new tax to fund social housing which has the peak builders’ body offside

A new Social and Affordable Housing Contribution will apply a tax of 1.75 per cent to all new developments with three or more dwellings and to all new subdivisions with three or more lots from July 2024.

The tax will apply to the majority of new housing in Victoria, covering all local government areas in metropolitan Melbourne, as well as the regional cities of Greater Geelong, Ballarat, and Greater Bendigo.

HIA’s executive director Victoria Fiona Nield said the announcement that the Victorian Government will introduce a new tax to fund social housing is simply the wrong approach and will be another hit to housing affordability for all Victorians.

“The cost of new homes after July 2024 will increase with this tax being passed through in the land prices for all new lots in these areas,” Ms Nield said.

“Victorian home buyers already pay a range of taxes when they buy a new home, contributing half of Victoria’s tax revenue now.”

In Melbourne 38 per cent of a new home build is made up of taxes, fees and charges.

This new tax will see land and house prices being pushed further out of reach of new home buyers.

Ms Nield said that ultimately it is new home buyers who will lose out as the taxes must be passed on in higher land and house prices.

“Median land prices are $377,000 in Melbourne, while the median house price is now $950,000.

“Home buyers are already contributing their fair share of revenue to the state.”

The HIA estimates that this tax could add over $6,600 to the cost of land for new homes.

Add stamp duty and GST along with many more costs and this tax could cost more than $20,000 for a new home buyer, adding to their mortgage repayments.

“Funding for social and community housing is a critical role of government, but this is a community need and the response should be an equitable one,” Ms Nield said.

“It simply doesn’t make sense to suggest that making houses for those that can afford to buy a new house cost more is the right solution to support those that can’t afford to buy one.

“This tax will perversely make the problem of affordability for all Victorians worse, not better.”

The HIA is also concerned that this tax also comes at a time when the government is implementing a new windfall gains tax in regional Victoria which will raise land prices significantly, increasing building code requirements that will add to construction costs.

To add to this, the HIA are also concerned about the increased builder registration fees of between 40 per cent and 200 per cent.