$34,000 Per New Home: The Victorian Election Australia's Investors Can't Ignore | APS177

Victoria goes to the polls at the end of November, and it’s not just your land tax on the line. Every new home built near Melbourne’s new rail loop could face a charge of almost $34,000. This election decides whether that line gets built, what happens to prices around it, and where the state’s economy goes next. The result could come down to two seats in Melbourne’s east, Glen Waverley and Box Hill.

I’m not here to tell you who to vote for. Prices are falling, rents are rising, and interest rates are still high, so this vote affects your tax bill and your home’s value today, as well as Victoria’s economy for the next decade. So which part of your money is each party going after? And whatever the result, what should you do next?

Section 1: What Are We Actually Voting On?

So what exactly are Victorians voting on? On November 28th, Victoria elects a state government. The state controls land tax, stamp duty, and the short-stay levy, along with planning, from new train lines to building heights. Negative gearing, capital gains tax, and immigration are up to Canberra, but the new rail loop is a state project. The SRL, or Suburban Rail Loop, runs underground through Melbourne's middle suburbs.

That's the scope, so let's look at the race. You need 45 of the 88 lower house seats to govern alone. Labour has held power for 12 years and wants a fourth term, which would make it 16 years, and that's too long. In a major poll in early October, the Coalition had 29% of the first-preference vote, Labour 24%, and One Nation 22%. After preferences, the Coalition led 53% to 47%.

That looks like a Coalition edge, but seat by seat, it's a different story. Roy Morgan's seat-by-seat model has Labour and the Greens on 46 seats, and the Coalition and One Nation on 42, so neither major party reaches 45 on its own. That's a hung parliament, where no party can govern alone, and while it's only a projection, nobody can call this one.

So where will this be won or lost? A big part of the answer is Melbourne's east. Labour holds Glen Waverley by just 3.3%, so if 3.3% of voters switch sides, the seat changes hands. In Box Hill, Labour's margin is 7.2%.

So with the race this close, which parties would cut taxes for property owners, and by how much? To answer that, we need to look at where Victoria gets its money.

Section 2: Property Taxes Are Victoria's Lifeline

How does the Victorian government pay its bills? In May's Budget, payroll tax is the biggest state tax, followed by stamp duty, which you pay once when you buy. Then comes land tax, paid every year on land you own, not counting your own home. Stamp duty and land tax make up around 40% of state tax revenue, so for every $10 Victoria collects, about $4 comes from property.

Stamp duty rises and falls with sales and prices, so when the market cools, that income shrinks. This year's Budget already cut the stamp duty forecast from $10.6 billion to $10 billion.

And then there's debt. Net debt, meaning what the state owes minus its cash and investments, will pass $175 billion by next June and approach $200 billion around 2030. Interest alone will cost nearly $9 billion this year, more than $24 million a day, which is almost 90% of a year's stamp duty.

And with the market where it is, the state is stuck in a loop. Falling prices mean fewer sales and less stamp duty, which leaves the state short of cash and makes tax cuts even harder.

Still, every election, the parties line up to promise tax cuts, because votes have to be won. The way I see it, property taxes are the state's lifeline, so whoever wins can't cut them much, and any cuts will be mostly for show. Cut too fast, and the budget hole has to be filled elsewhere. Cut too slowly, and voters won't buy it.

Section 3: How Land Tax and Stamp Duty Could Change

So what's each party actually promising on land tax and stamp duty? All three say they'll cut land tax, and the difference is how fast.

Start with how land tax went up. To pay down COVID debt, the state cut the land tax-free threshold from $300,000 to $50,000 in 2024. That added more than 300,000 land taxpayers, including plenty of families with one small investment property. The measure is due to run out in mid-2033.

Both major parties now say they'll lift the threshold back to $300,000. Labour would raise it by $25,000 a year for four years, then speed up, getting there in the 2033-34 financial year. The Coalition would lift it by $50,000 a year and get there by 2031-32. One Nation also wants the threshold restored, but hasn't given details.

Here's a detail the news rarely covers. If your investment properties add up to more than $300,000 in land value, you also pay a $975 flat charge every year, plus 0.1% on top of the normal rate. Lifting the threshold doesn't touch that, and neither major party has said whether it'll end early. So if you own several properties with high land values, don't expect to save much, because nobody wants to touch the most expensive part of the tax. Land held in trusts and companies is taxed differently, so check with your accountant.

On stamp duty for first home buyers, though, the parties are far apart. First home buyers pay no stamp duty under $600,000 and get a discount up to $750,000. But Melbourne's median house price is over $900,000, so on a median house they pay the full amount, about $50,000.

The Coalition promises no stamp duty for first home buyers under $1 million, whether the home is new, established, or off the plan. It hasn't said what happens above $1 million, or when that starts. The Greens go further, with no stamp duty for owner-occupiers under $1.1 million and a phase-out up to $1.6 million. They'd fund it with higher land tax on investment landholdings worth over $5 million. Labour would keep today's thresholds and extend the off-the-plan concession for apartments and townhouses to next April.

For young families saving a deposit, the stamp duty difference matters most. But most of that tax saving ends up in the price, so sellers of established homes, developers, and builders come out ahead.

The Coalition would also scrap the 7.5% levy on stays under 28 days, which is mostly on Airbnb, and the Emergency Services and Volunteers Fund levy on your council rates. It says the second one alone would save each household $84 a year.

We hear about tax cuts every election, but has the tax you pay ever gone down? They’ll always cut some tax and charge it back somewhere else. Government spending keeps growing, and the biggest item on Victoria's bill is the new rail loop, so whether that project continues comes down to this vote.

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Section 4: The SRL Is More Than a Train Line

Let's start with what everyone wants to know: will the SRL get built? The eastern section has six new stations: Cheltenham, Clayton, Monash, Glen Waverley, Burwood, and Box Hill. Tunnelling started in September, and the target opening date is 2035.

In August, the Premier dropped the underground interchanges at Box Hill and Glen Waverley and brought the cost estimate down to just over $33 billion. That's more than three years of the state's stamp duty. The Victorian Auditor-General's Office said in August that the project is likely to go over its published budget, and that opening on time in 2035 is at risk.

Labour says keep building, the Coalition says pause it for a review, and One Nation says cancel it and spend the money on the airport rail link and electrifying the Melton line. And the two seats that could decide this election both sit on this line.

The precinct plans around the six stations took effect in July. Projects worth over $50 million, or six storeys and up, now go to the Planning Minister instead of local councils, and neighbours have less room to object or appeal. The state wants more than 70,000 extra homes there.

So what does that mean for owners? If your area is mostly houses today, it could be rezoned for apartment buildings. Your block becomes worth more to developers, but the area gets denser and construction goes on for years. How high you can build on each street depends on the final planning maps.

Paying for the line is the harder part. Some of the cost is meant to come from value capture, which in plain English means whoever benefits from the line pays part of the bill. Every new home built in a precinct will attract an infrastructure contribution. It starts as early as next year at more than $11,000 and rises to almost $34,000 after 2032, roughly three times as much, though in some precincts it won't apply until 2032. If you're living in your own home, you won't pay it.

If you ask me, a project costing more than $30 billion still doesn't have all its funding, and that matters more than whether it gets built. On paper, developers pay the contribution, but it'll most likely end up in new home prices or push down what developers pay for land. So if you're buying new there, or selling to a developer, factor it in.

There's also a claim online that prices near the stations went up as soon as the plans came out, but no official source I could find has measured a station premium. Real estate websites show slight rises in Glen Waverley and no change in Box Hill, but school zones and local demand could explain that too. Around an SRL station, the biggest risk is paying a premium for a station plan that hasn't been proven.

Section 5: Where Melbourne's Market Is Heading

Where is Melbourne's market in the cycle right now? Cotality's September data shows Melbourne prices fell about 6% over the year, to a median of around $780,000. Houses have fallen further than units, and Melbourne prices are now 7% below their March 2022 peak. National prices have been falling for six months, largely because higher interest rates mean buyers can borrow less.

Rents are going the other way. SQM Research puts Melbourne's vacancy rate at 1.8% in August, so fewer than 2 in every 100 rentals are empty. Asking rents are around $695 a week, still cheap for a capital city, and up about 6% over the year. So each dollar of property value now earns more rent, and gross yields are rising. But in most cases the rent still can't cover the repayments on an 80% loan, so cash flow is still negative. I'd guess Melbourne landlords have mixed feelings: watching prices hurts, but collecting the rent is reassuring.

On interest rates, the RBA lifted the cash rate to 4.60% on September 29th, its fourth hike this year. September quarter inflation comes out on October 28th, and the RBA meets again on November 3rd, both before polling day. If rates rise again, variable-rate repayments keep climbing, whoever wins in Victoria.

What does all this mean for investors? Victoria has added one cost after another for landlords, from rental standards to land tax and the short-stay levy. Cotality's head of research says high taxes, low yields, and weak growth have pushed investors interstate. Still, the homes they sell give first home buyers more choice.

Section 6: Three Outcomes, Three Directions

With all that in mind, how does each possible result play out?

First, let's say Labour is re-elected. Land tax relief follows the slower timetable, first home buyers' stamp duty stays as it is, and the off-the-plan concession carries on. The SRL, the precinct rules, and the infrastructure contributions all go ahead, along with faster development approvals. But look at what Melbourne has become over the past 12 years: debt piling up, crime rising, and state taxes the highest in the country. Is that the Melbourne you want? On housing, things carry on as they are, and with immigration being tightened, the market could get weaker.

Second, let's say the Coalition wins. Land tax relief comes faster, so investors get a bit more, a bit sooner. If the stamp duty exemption goes ahead, first home buyers win most directly, and the short-stay levy and the emergency services fund are scrapped too. The SRL is paused for review. Then there's the Activity Centres program, which concentrates new housing around train stations and shopping centres, with Chadstone and Ringwood on the list. The Coalition has promised a cash surplus by 2032, and independent economists estimate that would take around $8 billion a year in tax rises or spending cuts.

I think the Coalition is more practical with money. Run the state like a business, and you avoid a lot of big mistakes, from throwing money around in the name of so-called fairness to taxing your own people more just to look good. I'm not saying Melbourne prices will take off the moment the Coalition gets in, but I am saying the market would probably be slightly better.

Third, if nobody gets a majority, whoever governs would need One Nation, the Greens, or independents. Premier Carroll says he'd rather hand back the keys to government than do a deal with the Greens. I’d take that with a pinch of salt.

Opposition Leader Wilson says the goal is to govern alone. In a hung parliament, election promises become bargaining chips: One Nation wants the SRL cancelled, and the Greens want a two-year rent freeze, then a cap on yearly increases. Policy would move slowest here, because every step has to be weighed and argued over. For owners along the SRL, this outcome is the biggest headache, not because it's good or bad, but because it's uncertain.

Ending

So where does that leave you? If you can vote, vote for whatever serves your interests best. But step back and look at the whole picture, and your choice is really this: give up the future for today, or give up today for the future.

Whoever wins on November 28th, the rule for property doesn't change: buy on numbers that work under any government, because promises can change after polling day.

Watch the video version of the blog on YouTube.

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