Confidence in Victoria’s property industry has fallen to near record lows, a new survey shows.

And industry participants are damming in their assessment of the state government just months out from October’s election.

The Property Council of Australia and construction management software provider Procore have released the June quarter edition of their Procore/Property Council Property Industry Sentiment Survey.

At a national level, the survey indicates that confidence in the nation’s property sector has plunged over recent months on account of the Iran War, the May interest rate hike and tax changes which are associated with the Federal Budget.

But the situation is particularly dire in Victoria, where the confidence index plummeted by 17 points to go from 84 in March to near record lows of 67.

This represents the lowest confidence level for any state/territory (see chart) and is far below the national average of 92. (This represents the fourteenth occasion over the last sixteen quarterly surveys that Victoria has had the lowest confidence rating.)

It is also the lowest quarterly reading for Victoria in the survey’s 15-year history apart from the early days of COVID.

Any reading below 100 denotes negative sentiment overall.

(Confidence in Victoria is far lower than that in any other state.)

Drilling down further, detailed results are alarming.

For example:

• Victoria is the only state in which survey respondents anticipate a decline in forward work schedules and staffing levels over the next twelve months.
• Victoria scored the lowest of any state/territory in regard to the twelve-month outlook for capital growth in each of the residential, retail, industrial and retirement living sectors. (In the other two sectors of offices and hotels, the state comes in second lowest behind the ACT.)
• Victoria registered the lowest score of any state/territory in terms of both twelve-month expectations regarding the state economy and the performance of the state government in planning and managing growth.

The reading comes as conditions in Victoria’s property sector are challenged relative to other states.

In the residential sector, Queensland, Western Australia and South Australia have experienced a strong recovery in house price growth and new home building activity over recent years.

In Victoria, however, hose prices in Melbourne are stagnant and building approvals remain flatlined at subdued levels.

In the commercial sector, meanwhile, Melbourne office vacancy rates of 19 percent are far above any other capital city in Australia.

(Victoria has recorded the lowest confidence level during fourteen of the past sixteen surveys. The state has thus continually been on or near the bottom over the past five years.)

Worst ever state government performance assessment

Perhaps unsurprisingly, survey participants are scathing in their assessment of Victorian Government.

As part of the survey, participants were asked to assess the performance of the government in the state or territory in which they primarily operate in terms of planning and managing growth.

All up, Victorian participants gave their state government a dreadful score of minus 86.4 (-86.4).

This is the lowest score which has been given to any government across the survey’s fifteen-year history.

It represents disillusionment with the government’s policies and performance.

As things stand, the Victorian Government is pursuing a number of strategies to grow the state’s economy and unlock greater housing supply.

Released in December 2024, the state’s Economic Growth Statement aims to grow the economy through targeted investment in five sectors and to provide room for business to grow by unlocking more industrial land.

Meanwhile, the state hopes to unlock 2.24 million new homes by 2051 by establishing mandatory housing targets for local councils, unlocking surplus government land for development, fast-tracking major housing projects (including in activity centres close to public transport) and expanding investment in social and affordable housing.

However, there is dissatisfaction about government policies and performance across several areas.

Concerns include:

• The level of state debt. As of June 2025, the state had a net debt of $150.9 billion, equal to 23.7 percent of gross state product (GSP). This is the largest debt level for any state/territory in the country. By June 2030, Victoria’s net debt is expected to reach almost $200 billion ($199.3 billion) or 24.4 percent of gross state product. This is raising concerns about the state’s ongoing ability to deliver infrastructure and services as well as its reliance upon revenue from property-related taxes.
• The level of taxation which is levied against the property sector (see below).
• Ongoing media reports of corruption and mismanagement on large-scale infrastructure projects.
• A subdued economic performance overall along with a sense that the state is losing critical investment to other states. In 2024/25, Victoria’s economy contracted by 0.8 percent on a per capita basis. This was the worst per capita performance of any state/territory.
• Ongoing challenges with crime. This includes a spate of attacks on business premises by organised crime gangs over recent years as well as general concerns about crime and safety more broadly. This is likely discouraging investment particularly in sectors such as retail and hospitality which have been impacted by the attacks.

Finally, there is a sense that the Melbourne CBD has lost a significant amount of its previous vibrancy and vitality which existed prior to the COVID lockdowns. (That said, the city still ranks fourth on the Global Livability Index which is published by the Economist Intelligence Unit.)

(Survey participants have given the Victorian Government the worst ranking of any government in the survey’s history for its performance in planning and managing growth).

The biggest property taxing state

Arguably the biggest area of dissatisfaction as far as the property industry is concerned involves the degree to which property is taxed by the state government.

According to data from the Parliamentary Budget Office, the Victorian Government generated around 16.3 percent of its overall revenue from all sources through property taxes in 2024/25 – second only to New South Wales.

Taking out non-taxation sources of revenue, property taxes account for around 42 to 47 percent of the government’s overall taxation-based revenue.

Relative to the size of its economy, the state currently has the highest rate of property tax out of any state or territory.

(According to the Parliamentary Budget Office, the relatively high rate of property taxation in Victoria reflects the state’s relatively lower revenue which is generated from other sources such as royalties (such as from mining revenue) and Australian Government grants.)

In particular, the Property Council has been angered by the introduction of the windfall gains tax in July 2023 and a doubling in the rate of the Absentee Owner Surcharge in 2024.

The windfall gains tax aims to capture a portion of the value uplift that occurs when land is rezoned for residential housing. It applies in cases where the value of the uplift for properties exceeds $100,000, with rates of 50 percent being charged on uplifts which are valued at more than $500,000.

The objective of this tax is to capture a share of the sudden and massive increase in land values (from which property developers benefit) that occurs when land is rezoned for residential use. This can then be applied to offset the cost to the taxpayer of building critical infrastructure such as transport, schools and community services which are needed to support new housing delivery in and around newly rezoned areas.

Meanwhile, the absentee owner surcharge applies a four percent flat tax on the value of land which is owned by non-residents who are absent for more than six months during the year. The surcharge was introduced in 2015 at a time of a surge in Chinese investment in the apartment sector.

This surcharge aims to discourage foreign property owners from absorbing housing that would otherwise be available to Australian buyers.

It also aims to ensure that foreign property owners contribute their fair share toward the cost of providing the infrastructure and services from which their land holding benefits.

However, the Property Council argues that these two taxes are having a negative impact on new housing delivery and should be abolished.

It says that an increase to the rate of the absentee owner surcharge (from 2 percent to 4 percent) that was introduced in 2024 has resulted in a 53 per cent drop off in overseas investment in the past three years.

Meanwhile, it says that the windfall gains tax adds a significant layer of complexity and cost to rezoned land.

It adds that Victoria is the only state which taxes these windfall gains.

Plan needed

Commenting on the survey results, Property Council Victorian Executive Director Cath Evans said that the industry has lost faith in the state’s economic direction and ability to deliver growth.

She called on the government to outline a plan to restore the economy and attract investment.

“In the last 90 days, the Victorian Government handed down a State Budget which outlined no meaningful plan to attract the investment we need as a state,” Evans said.

“Investment is leaving Victoria at scale and development projects are becoming increasingly difficult to deliver because of uncompetitive tax and regulatory settings.

“Within the next 30 days, the government needs to outline its plan to restore Victoria’s economy, and attract businesses and investors back to the state, and this starts with the abolition of investor taxes.

“Unless the government changes course, confidence will continue to stay at record lows, and all Victorians will ultimately pay the price.”

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