There are fears landlords will pass the cost of a new land tax introduced in the Victorian state budget onto renters, a concern the treasurer has rejected as "specious logic".
Treasurer Tim Pallas's ninth budget is defined by belt-tightening measures in an effort to rein in ballooning debt at the start of his government's third term.
Key to the state government's 10-year fiscal repair plan is a COVID debt levy to be imposed on big businesses, holiday-home owners and landlords.
Additionally, the threshold for Victoria's land tax will be lowered from $300,000 to $50,000.
The annual charge will apply to investment properties and holiday homes, not the family home. It is expected to apply to about 380,000 home owners who would previously not have paid the tax.
The hit to what the government labels the big end of town has echoes of the mental health levy on large businesses introduced in the 2021-22 budget.
The Victorian executive director of the Property Council of Australia, Cath Evans, said the new land tax could be passed onto renters or drive investors interstate "where it's easier to transact business".
"Lowering the tax threshold will of course cause increased stress and pressure for those land holders to maintain those properties," she said.
"And it does become a risk that those costs get passed onto renters, and of course adding to what is already a significant challenge in our rental market here."
Ms Evans and the property council welcomed moves to eradicate stamp duty for commercial and industrial transactions from mid next year.
Business property owners will be able to pay an annual property tax over 10 years, rather than the lump sum currently paid at the time of purchase, in a similar move to recent changes in New South Wales.
Additionally, the absentee owner surcharge — which applies to foreign investors — will increase from 2 per cent to 4 per cent.
Quentin Kilian, head of the Real Estate Institute of Victoria, said the budget contained parts which were "good and interesting and horrible" for the sector, with the stamp duty changes for commercial properties having possible benefits.
"What we have seen, though, is a horror move to increase land taxes yet again," he said.
He said there was a "risk" the land tax changes could see investors leaving the state.
"And of course, there's nothing in this budget unfortunately to increase supply or to even address the investors coming back into the market to ease the supply in the rental market.
"That is something that is sadly missing."
Renter in tightening market fears homelessness
Like much of the rest of the nation, Victoria is in the grips of a rental crisis which has struck at a time of rising inflation and interest rates.
Data released by PropTrack the morning of the budget showed the number of Melbourne properties listed online for less than $400 per week had hit a record low. Melbourne's rental vacancy rate more than halved in just a year to about 1.41 per cent, while the overall rate for the state is at just 1.3 per cent.
At an open home in Melbourne's outer west on Tuesday, Darren Blackley told the ABC he and his family had been searching for a new rental for about three months.
The landlord of his current property is selling as they are unable to keep up with interest rate rises.
"So far, every property that we've been to, we've just been knocked back," he said.
"It's just so hard at the moment with the rental crisis. It's making it hard for everyone."
The forklift driver said he already feared he and his wife and two children would be left homeless if they did not find a rental soon, but was unable to find help through homeless services.
"I don't want to put my family on the street," he said.
With the looming changes to the real estate sector in the budget, he said he was even more concerned about possible rises to rental prices.
"Everywhere, it doesn't matter where you're from, north, south, east, west — everyone is finding it tough," he said.
The Victorian Council of Social Service's Emma King said the land tax changes should not be passed onto struggling renters.
"The reality is if you're wealthy enough to own a home, you are doing really, really well," Ms King said.
"And you have got no excuse whatsoever to pass that [a land tax] onto vulnerable Victorians."
Government says rental prices more about supply
As he sold his budget on Tuesday afternoon, Mr Pallas said the argument that the tax hike would be passed onto renters was a "specious logic" and was not borne out by history.
"I don't believe it plays any substantial role," he told ABC Radio Melbourne.
"What I believe is playing a substantial role is both the increase in the ... charge for interest in a rental property.
"But more importantly, the fact that there is the law of supply and demand operating to the advantage of landlords who are effectively pumping up the price."
He said the new measure would have a relatively small impact on landlords in the broader scheme of property ownership.
Premier Daniel Andrews said while the rate property prices had risen over the past decade, "there is a capacity to pay".
"Rental prices are, I think, much more a function of not enough rental supply, rather than land tax," he said.
He pointed to changes the government had made to the Rental Tenancies Act to protect renters, as well as the government's so-called big housing build for social and affordable housing.
But shadow Treasurer Brad Roswell labelled the changes a "tax on renters".
"This is going to make it harder for people who can least afford it to enter the rental market," he said.
"Measures introduced today are going to make it much more difficult for young people, for vulnerable people who are simply asking for a roof over their head."
