Drowning in debt
Last year, one of Australia's leading property buyer's agencies, Propertyology,
announced that it would boycott investment in the state of Victoria.
Victoria became world-renowned during the pandemic for maintaining some of the world's longest lockdowns at more than 260 days.
The 2024 budget estimates show net debt projected to keep climbing towards an unprecedented $236 billion by 2026.
Source: The Age
Of course, interest expenses have also now gone through the roof alarmingly in Victoria's state budget.
One of the ways Victoria is aiming to balance the books is through dialing up land taxes for property owners, with annual taxes even for low land value properties.
The problem with this approach is that investors will almost certainly simply move to another state, resulting in chronic rental shortages in Melbourne and Victoria's regional cities within the next year or two.
The plan for Melbourne seems to be a big push towards raising capital for large Build to Rent towers, which is fine as far as it goes.
Quantity has a quality all of its own, as Joseph Stalin once observed - although of course not everybody wants to live in a corporatised tower block in the Docklands (ironically they can sometimes have an Eastern European feel to them).
New South Wales previously faced state budget challenges and in part addressed them through asset sales.
It looks like Victoria may face some similarly tough decisions to balance the books and rein in the debt over the next few years, and for now the target appears to be large companies, landholders, and property investors.
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