Investors are enjoying a greater return as demand for rental properties rise. Would-be investors want more development while the state government is being called upon to reform tax policies to get investors back into the market.
The Real Estate Institute of Victoria (REIV) has called for the state government to offer incentives in an attempt to attract investors back into the residential market. The lack of investors in the market has resulted in record low vacancy rates with REIV chairman Enzo Raimondo describing the situation in Melbourne as 'desperate'.
"In the space of two months the vacancy rate in the inner ring of suburbs has more than halved from 1.7 to 0.7%," he says.
Raimondo believes that the government needs to act if investors are to be attracted into the market.
"The last time rental accommodation was this low was back in June 1982. There are three initiatives that can be done to ease this situation; additional housing needs to be built in locations that have high demand, there needs to be greater diversity in housing construction and the impact of taxation needs to be examined," he says.
Encouragingly, Victoria state treasurer John Brumby says building approvals in Victoria are the country's highest – recording over $1bn in approvals for 66 of the last 67 months.
"Residential approvals are up 20.9% over the year compared to national growth of 12.8% while non-residential approvals are more than twice the level of February 2000," he says.
"Victoria has the right mix of competitive business taxes, record high investment in infrastructure and a streamlined planning system – an ideal environment for construction," he says. Residex data shows that the more affordable properties are in regional Victoria where the median house price was only $245,500 compared to Melbourne’s median price of $401,000.