Windfall Tax and the Melbourne Property Pipeline
The proposed Victorian windfall gains property tax has the potential to completely change land prices across the state.
Meanwhile, developers have never been more hungry for land in an increasingly tightly held market.
The windfall gains tax, which comes into effect in 2023, will mean any capital gains developers enjoy from rezoning will be taxed at 50 per cent—for example, if the land is rezoned from industrial to mixed-use or industrial to residential.
“It’s going to affect every regional property market in the state. If you have a farm and you want to turn it into residential land, 50 per cent of the uplift will be taxed,” CBRE director Paul Wheate says.
The proposed tax will not only affect the Melbourne land market, but also regional land banks.
“You have areas where one side of the road is currently zoned residential, the other side is farming land, but slated for housing in the future. One side of the road could be subject to the windfall gains tax while the other side won’t,” he says.
“This inequity may have the reverse impact of constraining land supply if developers choose not to develop as a result of this tax. What the government is proposing is going to increase prices in a climate where affordability is always front of mind for all levels of government.”
State taxes aside, there’s huge demand for development land around Melbourne, in particular broad hectare subdivision land.