Daniel Andrews’s government says it expects to raise tens of millions of dollars a year from the housing affordability policy

Investors in Victoria who buy properties only to leave them empty will attract a new vacant residential property tax, a move the state government says will help free up properties to renters and first home buyers.

The tax will take effect from January and will mean owners who “unreasonably” leave properties vacant for more than six months each year will face a tax levied at 1%, multiplied by the capital improved value of the property. For example, if the property has a capital improved value of $500,000, the amount paid each year would be $5,000.

Victoria’s treasurer, Tim Pallas, told ABC radio 774 in Melbourne on Monday that “I hope I don’t raise a cent out of it” because he would prefer people made the properties available to renters or for sale. However, the government has said it expects to raise tens of millions each year from the policy, with 20,000 dwellings in metropolitan Melbourne currently vacant.

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There will be exemptions – for example, for holiday homes, deceased estates and homes owned by Victorians who are temporarily overseas.

It is one of a range of measures announced by the Victorian government over the past week in an attempt to make housing more affordable to first home buyers. The government has abolished stamp duty for first home buyers who purchase a property below $600,000, while those buying a home valued between $600,000 and $750,000 will also be eligible for a concession, applied on a sliding scale.

The exemption and concession will apply to both new and established homes.

“A lot of these efforts are doing what the commonwealth should have done,” Pallas said.

Associate professor Ashton De Silva from the Centre for Urban Research at RMIT University said there was a number of reasons people held on to empty property. Some investors only wanted to hold property for a short period of time and aimed to sell it in a rapidly appreciating market, making a quick profit. For those people, renting a property out in the meantime could be a hassle. Others were trying to avoid various taxes.

“The integrity of this policy will be directly linked to how well some of these counter-measures, such as exempting holiday homes, are carried out,” DeSilva said.

“Home ownership and investing are such complex areas and, in some cases, people are going to look at this tax and say, ‘OK I’ll just get rid of it’. But I’m not convinced the government will raise the revenue from this policy that they are currently projecting.”

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On Monday the federal treasurer, Scott Morrison, told 2GB radio in Melbourne that housing affordability would be a “key issue” for his second budget.



He said of the Victorian government’s policy announcements, “Good on them for having a crack at this.” But supply was the key issue, he said, adding that he believes the measures will ultimately drive up property prices.

“At the end of the day, if that just means people just bid up more at the auction because they can borrow more because they don’t have to pay stamp duty then obviously that will take prices in one direction ... without addressing the supply issues,” he said. “You have got to get more houses built.”

During a press conference in Melbourne on Monday, the prime minister, Malcolm Turnbull, agreed, saying there was a need to get more dwellings approved, especially around transport infrastructure.