VIC Victorian Government debt vs. future house price

Hi all,

Been doing some research Melbourne properties, however a little concerned on the Vic's high government debt and how that might impact on the future of property price?

The Vic state government debt has skyrocketed since covid



also much higher in terms of % vs. NSW, WA and QLD


Out of the major states (QLD, NSW, WA, VIC), Vic also don't have the sweet mining royalties that others enjoy.

Reading a few news articles, it seems that the state government is moving towards higher tax on corporates and investors and also trying to cut back on infrastructures.

What are people's thoughts on how this will impact property price in the next 10-20 yrs?
Fear mongering over exaggeration by media or possible long term impact?

 

It won't have any impact.

 

It's a risk for investors but generally people don't check state debt before they buy a house and doubt it will affect property prices in any meaningful way.

 

Just makes it more expensive

State government looks to fill revenue hole with more taxes on property.

Economics 101, more taxes increases the cost of real estate by that amount.

Investors leave, supply dries up in terms of rentals, rental yields grow.

 

any evidence for that? or a link?

@hpresident They already tax your land lots, but its only ~ 2k or so a year, so 40$ a week. call it 100$ if they double it. thats not the issue.

bigger problem is if they decide to tax corporations, then they would move. COOPs move, jobs lost. jobs lost people go away. people go away REA goes down.

while i agree that melb now "seems" cheap, it is cheap for a reason. reality is melbourne has absolutely nothing for it that other cities can't offer instead. Brisbane is now just as big of a metropolitis and has a nicer vibe to it. So combine it with bad taxation in victoria, ****** weather and ohh well - plenty of land - it is a major risk.

on that same token, remember that even a dead cat bounces.

 

I’ve long been an advocate for this risk, however I believe the biggest impact will be felt via population growth. In 2014 when Andrews kicked off the biggest infrastructure campaign in the states history was when the debt really started to move. It created an insane number of new jobs (new being the important word), which meant new people needed and new houses needed, which in turn shot Victoria to the top of the private dwelling construction rankings too. The price boom from 2014-2017 was hugely underpinned by this demand surge, coupled with falling rates. In 2017 new dwelling completions caught up to the population growth and Melbourne began to deviate a little from Sydney. Rents stopped moving and overall the market was a little up and down for some time. Covid certainly added a new dynamic, but I believe we’re largely through that now.

the issue for Victoria is that it’s growth was based on the development of new jobs. Now, will a future of subdued government spending, it will be harder to just maintain let alone grow. If population growth cools too much then the private building sector too will suffer. This was a big worry for me for a long time, in that it would put Victoria into a prolonged stagnation that other states would not be a part of. To an extent, that is what has played out since late 2022.

why am I not so concerned now? “Sticky inflation”. It has caused a drastic cutback in private construction already (as todays dwelling approvals numbers only reinforce), and supply has appropriately constrained. Inflation will lift wages, which will underpin the increased cost of housing - especially given the pace of rent increases. I do think Victoria will have some minor headwinds this year in the building sector and that will have a small impact on population growth, but there is enough momentum in the economy that I think it will be short lived. Certainly nothing like WA experienced post-2014.

 

Melbourne is cheap for a reason. It's not as attractive to invest here as other cities.
It will undoubtedly have growth cycles in future, of course, however with decades of the socialist left faction of Labor running the show, it's clear to all that it is not going to become quickly a business friendly place once again.
Lots of long established people, their money and their business operations are still moving interstate. This trend will continue as long as the current State Govt makes it hard for people.
Sure, the State will backfill with students and uber driver immigrants and a bloated public sector spendathon but ultimately its unsustainable.

 

I wanted to see how lockdown restrictions (2020-21) and ***t weather affected the median price in Melbourne for Houses, looks like the median house sale prices grew during lockdown?
And it started coming down from early 2022 either coz people started migrating to other states or high interest rates?




REIV - Victorian Insights

 

Victoria is a train on fire heading towards the end of the line which stops just before a canyon. Land tax was already a scam with the single holding/proportional tax. Now its even more of a disgusting joke. Tim Pallas with be known as the man who destoryed Victoria.

 

I can see we have headed straight to the hyperbole in this thread.

 

Not really. Its pretty simple who is to blame.

 

I would love to live in Victoria, some of the places such as Lorne and Sorrento are lovely places but I just can’t do it.
It’s sort of like the west coast of the US - some great places to live but can’t do it.
As a small business owner and someone who wants to create some independence, choice and freedom I don’t think I would have a chance - sorry if this is unpopular but it’s just the way I see things right now.
I am concerned about the direction many places in Australia is heading and that so many people are OK with it:

 

It's 1991 again. Those old enough will know what I mean. John Cain and Joan Kirner relegated Victoria the worst state in the country.

Then the messiah was elected. Jeff Kennet needs to get into the DeLorean and go back to 1992.

To answer the OP's question, things will be on the nose there for a while. Property is too cheap by historical measures and compared to a similarly populous Sydney. It will recover. Don't be surprised that when it does, it will do so on a tear. When? Who knows?

 

I thought houses everywhere went up during that lockdown period, especially lifestyle locations. Fhb's couldn't go on holiday so they bought a house. Those unpredictable fhb's led the surge at a time of doom and gloom and i think they'll do it again soon in Melbourne. It was a race for space. People didn't want to buy an apartment and wander through the foyers and stairwells every day.

 

i am not following the "cheap" arugment. northcote/ivanhoe - over 1.5M. inner south east ~ also all high 1's. how is that cheap?

 

Maybe Player means it is cheap relative to equivalent Sydney suburbs.. I don't know the area you are quoting but pretty much all of Sydney, east of the inner west is $2m + for a detached house.

 

I am weary of Victoria in the long term. Part of the Covid debt repayment plant is also additional payroll tax on businesses COVID Debt Repayment Plan | State Revenue Office
I can see long term businesses moving away. Sure the additional tax is low for now, but Victoria hasn't been business friendly for a while.

Victoria also seems to be cutting spend in infrastructure. I can see Victoria really struggle to boost its economy if major recession happens in the next 10yrs. Every other state will have the ability to raise debt for infrastructure projects except Victoria which is worrying.

 

We all know its not a "long term repayment plan" Its just a new forever tax they've called temporary. Another lying goverment scam.

Look at citylink. It cost 2 billion dollars to build and was ready in the year 2000.
"This massive integrated development, which cost approximately A$2 billion, began construction in May 1996 and opened in late 2000."

Each year citylink brings in almost 1 billion in tolls. How the hell are we still paying this off. its a SCAM.

"In 2022-23, CityLink enjoyed a 23.8 per cent increase in toll revenue to a record $894 million"

Same as this "covid levy". The fact is labor cant manage money and the Vic Gov is now broke as a joke. The funniest part is what happens next.

Once they have squeezed all the nice juice out of property owners the only other way to get money is by cutting money they give to police, schools, gov services etc. Thats when the real chaos starts.

 

I agree, Victoria is a basket case. There is no buffer left to stimulate economy.
No possibility of quick/ deep rate cuts
No more grand infrastructure projects to create jobs
No more crazy inflow of overseas students for next couple of years

I guess Victoria’s economic strategy is just to “tax the wealthy and hope for the best”

 

But there's not a lot left to sell/privatise and the debt is much, much higher!