Stamp Duty Discounts, Jobs, Housing Boost Victoria Budget

<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>Infrastructure spending, build-to-rent land tax changes, and stamp duty waivers for buyers of homes worth up to $1 million form part of the Victorian budget, in what is arguably the most important in the state’s history.</p><p>Tuesday’s budget revealed the pandemic’s true impact on the state, forecasting a record deficit with Victoria $23.3 billion in the red.</p><p>As state treasurer Tim Pallas handed down the delayed budget, Victoria recorded no new cases of coronavirus on Tuesday and zero active cases across the state. </p><p>But with 290,000 jobs since lost from the state economy, Victoria&#x27;s budget aims to spend big, to the tune of $49 billion over the next four years, with the goal of creating 400,000 jobs by 2025.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><h2><strong>Stamp duty discounts, infrastructure blitz</strong></h2></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>In its stride towards economic recovery, big-spending will go towards infrastructure with Victoria announcing almost $20 billion ($19.6 billion) to be spent each year until 2024. </p><p>This includes the $2.2 billion for the Suburban Rail Loop, and $2 billion towards Geelong Fast Rail—matching the federal government’s <a href="https://theurbandeveloper.com/articles/melbourne-airport-rail-lands-10bn-backing">contribution</a> to the project.</p><p>Average government infrastructure investment from 2020-21 to 2023-24 will be around four times the 10 year average of 2014-15.</p><p>Tax relief on stamp duty for residential property transactions of up to $1 million has also been announced.</p><p>A waiver of 50 per cent for new residential properties, and 25 per cent for existing residential properties, will be available for purchases of up to $1 million on contracts entered until 30 June 2021.</p><p>On a $1 million house, this change reflects a $27.5k saving for buyers of a new property, and a $13.7k saving on an established dwelling.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/0f731f5e-bcab-4e33-bc8f-6755ca3c2edd.jpg" width="800"/></picture><div><span style="align-content:center;opacity:0.8">▲ Victoria will waive 50 per cent of stamp duty on newly-built and off-the-plan homes, and 25 per cent on existing homes. </span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><h2><br><strong>Build-to-Rent land tax policy announced</strong></h2><p>Forming its $5.3 billion <a href="https://theurbandeveloper.com/articles/big-housing-build-offers-3bn-project-opportunities">&quot;Big Housing Build&quot;</a> initiative, build to rent land tax changes were included in the budget, which would make more projects in the sector viable. </p><p>The state announced a 50 per cent land tax discount for eligible new developments until 2040. These developments will also be exempt from the Absentee Owner Surcharge over the same period.</p><p>The state says it aims to increase its supply of housing and options for renters by supporting the build-to-rent sector.  </p><p>Regional Victoria is set to receive 25 per cent of the 12,000 new social housing package earlier <a href="https://theurbandeveloper.com/articles/big-housing-build-offers-3bn-project-opportunities">announced</a>. </p><p>Victoria has extended the $20 000 First Home Owner Grant for those buying or building a new home in regional Victoria, which applies to contracts of sale entered into, up until the end of June 2021.</p><p>A 50 per cent stamp duty concession on the purchase of commercial and industrial properties aims to lure businesses to regional Victoria, and will be brought forward to January 2021.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><h2><strong>Clean energy push</strong></h2></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>A $1.6 billion investment into clean energy across the state was announced.</p><p>This includes $682 million to develop Victoria’s Renewable Energy Zones—from Mildura to the east coast, and $448 million for home energy efficiency upgrades, which covers 250,000 low-income households and 35 000 social housing properties. </p><p>The state&#x27;s Jobs for Victoria announcement forms the centrepiece of its recovery plan, with $619 million pegged towards helping those out of work look for employment. </p><p>Employment fell by 180 000 between the March and September quarters 2020 and is expected to fall by 3.25 per cent in 2020‑2021.</p><p>Victoria’s unemployment rate is forecast to peak at 8.25 per cent in this year&#x27;s December quarter, and average 7.75 per cent in 2020‑21.</p><p>The government has set a goal of creating 200,000 jobs by 2022 and 400,000 by 2025.</p><p>Moody’s Investors Service estimates the state’s borrowing requirements in fiscal 2021 alone have risen by $20-$25 billion as a result of the second lockdown.</p><p>“While record-low interest rates will enable the state to absorb such a sharp rise in debt, borrowings will remain elevated for an extended period of time and significantly constrain Victoria’s operating profile over time,” Moody’s vice president John Manning said. </p><p>“In turn, this will test institutional capacity as the state targets fiscal repair over an extended period of time.”</p></div></div></div></div></div>

Tuesday’s budget revealed the pandemic’s hit on the state, forecasting a record deficit with Victoria $23.3 billion in the red.  

Pandemic Fight Trumps Office, Retail Struggle: Pallas

<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>Victorian treasurer Tim Pallas has flagged the possibility of a “Covid-normal Christmas” as the state government begins to outline its roadmap to rolling back strict stage-four restrictions and allowing construction workers to return to sites across the state.</p><p>Speaking to a Property Council of Australia audience on Thursday, Pallas said the pathway to entering “Covid normal” and in turn allow the state’s economy to reignite hinges on getting the Covid-19 outbreak under control.</p><p>Victorian businesses have been under tight restrictions since mid-March, with stage-four restrictions set to continue for at least another fortnight.</p><p>The outlined staged reopening will allow for some business and people-movement restrictions to be lifted on 28 September, if Melbourne’s average daily case count falls to between 30 and 50 in the prior fortnight.</p><p>“What we will seek to do is populate our projections with hard data as we have a capacity to monitor exactly how we are tracking,” Pallas said.</p><p>“There will of course be capacity to adjust at the margins, as we continue to assess any unintended consequences or any areas where we have been too hard on the community or business, without compromising our overall objectives.”</p><p>Across the September quarter the state government expects unemployment to hit 11 per cent, while gross state product is <a href="https://theurbandeveloper.com/articles/melbourne-loses-110bn-in-worst-case-scenario">expected to fall</a> by $10 billion.</p><p>Looking ahead it also projects the state economy will fall by 9 per cent over the 2021 financial year.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/ed14ae6b-e6ed-4d72-8f61-24913730557d.jpg" width="800"/></picture><div><span style="align-content:center;opacity:0.8">▲ The Victorian government has turned to modelling produced by experts from the universities of Melbourne and New England to inform its roadmap to easing restrictions.</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>Central Melbourne’s office and retail sectors have been particularly hard hit by the pandemic disruption, with thousands of people forced to work from home and 75,000 CBD jobs expected to be shed by the close of the year.</p><p>The city’s office vacancy rate has since surged from a historic low of 3.2 per cent in February to 5.8 per cent.</p><p>According to Deloitte Access Economics, the commercial tenancy relief code has cost commercial landlords an estimated $6.8 billion from April to September which is estimated to rise to $14.9 billion by March of next year.</p><p>When asked about the potential to accelerate the return to the office, in order to offset an anticipated 17 per cent fall in rental revenue, Pallas said the fight to save lives and halt the virus would take precedent, even at an economic cost. </p><p>“Tenants and landlords have a shared interest in getting businesses through this pandemic,” Pallas said.</p><p>“Without the mandatory code tenants and landlords would still be facing many difficult challenges and in a way the code has formalised a process of engagement.</p><p>“While this is an issue of mutual obligation and difficulty being felt across the commercial sector, it is also about trying to strike a balance consistent with the national cabinet framework.”</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/4cd772c4-b860-491b-b72d-cc113189b432.jpg" width="800"/></picture><div><span style="align-content:center;opacity:0.8">▲ The extended lockdown plan could not have come at a worse time for the owners of CBD office buildings, as it coincides with the highest rate of sub-lease vacancies in the last nine years.</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>State government directives to work from home if possible have sent occupancy to as low as 7 per cent across Melbourne city offices, according to figures collated by Property Council of Australia.</p><p>Sub-lease availability, which has been at historic lows for the past six years, has also surged by almost 120 per cent in the last six months.</p><p>“There will be for some time a lesser requirement for office space across the CBD, both from the private sector and government, as we see more capacity opening up as a consequence of people working from home,” Pallas said.</p><p>“I expect it will become an increasing feature of the changed way we work moving forward.</p><p>“What that means for the commercial sector over the short-term remains to be seen, but we are monitoring the situation and looking to do what we can to support the industry more generally.” </p><p>Pallas also offered hope to residential developers that Victoria would follow the lead of NSW and offer concessions that would make <a href="https://theurbandeveloper.com/articles/covid-conditions-ripe-for-build-to-rent">build-to-rent</a> projects more viable as part of a state stimulus package.</p><p>“Build-to-rent is becoming an increasingly viable option and we are looking at strategies being rolled out across NSW,” Pallas said.</p><p>“While we haven’t any commitments or announcements around the sector yet there is certainly value in it and is something we are looking at as a supportive means to create broader opportunities for the property industry moving forward.” </p></div></div></div></div></div>

In an address to the PCA, treasurer Tim Pallas has flagged potentially easing restrictions across the state in time for Christmas, if targets are met.

751558fd-f49b-4af5-b000-58fdae41c567

<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>Industry lobby groups have launched a scathing attack on the Victorian government’s plans to claw back millions of dollars from the development industry, claiming developers would not be able to absorb the costs and that they would be passed on to consumers. </p><p>Ahead of this week’s budget Victorian treasurer Tim Pallas, pictured above, said the “modest” increases would affect a small portion of the Victorian population (10 per cent) who paid land tax on properties that were not owner-occupied. </p><p>According to Pallas the $2.7 billion targeted measures were aimed at helping Victorians enter the property market and would ensure developers and investors made larger contributions to the services the community needed. </p><p>The Victorian government has forecast a revenue of about $40 million per annum from the taxation changes. </p><p>But Assemble managing director Kris Daff said he was disappointed by the increased property taxes and concerned it would also impact those seeking affordable and social housing.</p><p>He said the industry was unlikely to be able to absorb the increased taxes so it be passed on to tenants and consumers. </p><p>“This year is a time when government should be generating tailwinds for the real estate and construction sectors, sectors that are significant employers and generators of economic recovery and growth,” he said.</p><p>“For build to rent, there is still very little clarity on the land tax regime and what will make schemes qualify for any concession.</p><p>“Again any further impost will be passed on to tenants (if possible) and will ultimately affect affordability and the overall viability of the nascent asset class.”</p><p>The taxation changes proposed will increase land tax by 0.25 per cent on taxable land holdings valued between $1.8 million and $3 million, and 0.3 per cent for land in excess of $3 million.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/cedee827-2f81-4d2b-a1b6-e46741c1a4c2.png" width="800"/></picture><div><span style="align-content:center;opacity:0.8">▲ Lobby groups claim new $2.7-billion Victorian property tax increases will diminish retirees&#x27; nest eggs and make property less affordable. </span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>A new windfall gains tax will also be applied to properties that receive a valuation boost as a result of council rezoning when  the change in value is more than $100,000, with a 50 per cent tax on windfalls above $500,000, which the government said would be invested in public transport, schools and other vital infrastructure.</p><p>The Andrews government will also implement a premium stamp duty rate for property transactions of more than $2 million, increasing stamp duty payable to $110,000 plus 6.5 per cent of the dutiable value of more than $2 million.</p><p>The premium stamp duty is anticipated to net $137 million next financial year and affect less than 4 per cent of transactions in the state. </p><p>“It’s only fair that those making large profits return a reasonable proportion to the community—this means more Victorians can have the schools, hospitals and support they need and deserve,” Pallas said. </p><p>“Our tax system is fair and progressive, making sure that everyone pays their fair share to support Victoria’s economic recovery.”</p><p>Property Council of Australia’s Victorian executive director Danni Hunter said low-yield products—including social and affordable housing, and build-to-rent—would be heavily affected by taxation changes. </p><p>“The issue is we want those projects in Melbourne’s urban areas because they are well serviced by infrastructure and public transport and services… and the windfall gains tax will specifically target these areas,” she said.</p><p>“Disproportionately it will disadvantage these low-yield asset classes.</p><p>“The land tax component is going to make it much more expensive to develop and hold those properties, and it will be less attractive for investors.”</p><p>Hunter said they still hoped for an apartment stimulus package in Thursday’s budget but said the industry was “very undermined” by the tax announcements. </p><p>She said the sector would lose about 6000 jobs next year without a stimulus package supporting the Melbourne apartment sector. </p><p>The Real Estate Institute of Victoria claimed the tax increases would hurt self-funded retirees and worsen housing affordability. </p><p>REIV president Leah Calnan said property already accounted for 40 per cent of the government revenue and it would be hard for the sector to absorb further “tax burden”.</p><p>“If the Victorian government is serious about jobs and housing it needs to invest in real estate, not attack it,” she said.</p><p>“These sledgehammer taxes could cause a flight from property by self-funded retirees, for which property investment is their only form of income.” </p></div></div></div></div></div>

Industry groups have launched a scathing attack on the Victorian Government’s plans to claw back millions of dollars from developers...

f3cee8b9-7438-4146-bb1b-0d449dd6317b

<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>Build-to-rent developments will be exempted from absentee owner surcharges for up to 30 years under changes unveiled by the Victorian government in an effort to bolster the burgeoning sector.</p><p>It also announced that build-to-rent projects completed and operational before 2032 would be eligible for both the absentee owner surcharge exemption and the 50 per cent land tax discount for up to 30 years. </p><p>From 2020 an absentee owner surcharge of 2 per cent was applied to Victorian land where the owner did not live there, which presented a problem for build-to-rent assets.</p><p>Treasurer Tim Pallas said the changes were made after consultation with the industry. </p><p>“This will not only ensure Victorians have access to more rental homes and a greater range of housing options—it will create thousands of jobs as we rebuild from the coronavirus pandemic,” Pallas said. </p><p>“Home has never felt as important as in the past 20 months and this initiative will ensure Victorians have access to safe and secure rental properties for a long time in the future.”</p><p>Melbourne is the <a href="https://www.theurbandeveloper.com/articles/melbourne-build-to-rent-capital">build-to-rent “epicentre” </a>of Australia with almost double Sydney’s pipeline and quadruple Brisbane’s. </p><p>But developers have argued for an extension of the 2040 deadline initially mooted for land tax discounts due to the long-term nature of these investments of about 15 years.</p><p>These changes have gone some way to appease build-to-rent developers, but the <a href="https://www.theurbandeveloper.com/articles/pallas-budget-victorian-property-taxes">contentous windfall gains tax is going ahead</a>, which could heavily affect the feasibility of these projects, according to Property Council of Australia Victoria executive director Danni Hunter. </p><p>Earlier this year Hunter called for changes to the windfall taxes, which are being introduced to parliament this week. </p><p>“The Property Council warmly welcomes the Victorian Government’s vote of confidence in the emerging Build to Rent sector through the confirmation of the available tax concession for BTR developments in Victoria,” Hunter said.</p><p>“Having certainty on these important concessions will mean the industry can immediately press go on around 6500 BtR apartments in central Melbourne alone, locking in Victorian jobs and increasing housing choices.</p><p>“The confirmation of the start date, the application of the concessions to BtR developments that have been completed this year and, very importantly, the extension of the concessions to 30 years, provide the BtR sector with investment confidence to get on with the job of providing high-quality housing stock for our growing population.</p><p>“The Property Council is eager to see the full detail to be contained in the Windfall Gains Tax and State Taxation and Other Acts Further Amendment Bill 2021. As the concessions are contained in the same Bill as the Windfall Gains Tax, we caution the government to not wipe out the positives of the legislation with a poorly thought-out tax on rezoning and development.” </p><p>Treasurer Tim Pallas said the adoption of the windfall gains tax would provide a “fairer tax system” that ensured even distribution of money in the community. </p><p>The windfall gains tax will slug owners of council-rezoned properties, with a 50 per cent tax on windfalls above $500,000, which the government said would be turned into funding for public transport, schools and infrastructure.</p><p>Pallas said transitional arrangements would push back the start date to July 1, 2023, and would exempt proponent-led rezonings that were already under way by May 15, 2021. </p><p>“We want to ensure Victoria has a fairer tax system, with revenue from the windfall gains tax going back into Victorian schools, hospitals and public transport,” he said. </p><p>“We’ve consulted with industry and made the changes that are appropriate and fair, and will ensure the community benefits, as well as land owners.”</p></div></div></div></div></div>

Victorian Treasurer throws Build-to-Rent developers a bone as problematic Windfall Gains Tax introduced in parliament… 

TIM PALLAS