Victoria Records $2.53bn Loss in Negative Gearing
Australian Taxation Office data shows Victorian investors faced a collective $2.53 billion loss in 2023-24. This marks the sharpest decline among all states ahead of federal policy changes.
Victoria recorded a $2.53 billion collective loss for rental property investors in the 2023-24 financial year. This figure represents the largest negative gearing loss of any Australian state. The state swung from a $702 million profit in 2021-22 to this significant deficit. Higher interest costs were the primary driver of this economic shift.
The data highlights a $3.2 billion reversal in investor economics. Victoria holds the highest ratio of interest deductions to gross rental income in the country. Seven of the ten postcodes with the highest average annual rental losses are located in the state. Williams Landing investors reported an average loss of $10,294 per year.
Federal rules restrict negative gearing
From July 1, 2027, investors can only claim negative gearing on new builds. Existing properties purchased before May 12, 2026, are grandfathered in. Buyers of established homes after that date cannot offset losses against wages. They can only deduct losses against other residential property income.
The government aims to redirect capital toward new housing supply. Over 80 percent of new investor lending currently goes to existing homes. This policy change seeks to alter that distribution. It targets the concentration of investment in established stock.
Investors face rising holding costs
A western Melbourne tradesman sold an investment property after years of losses. He bought the home for between $600,000 and $630,000 in 2021. He now owes between $470,000 and $500,000. His weekly rent is $500 to $520, but costs leave him $800 to $1,200 out of pocket monthly.
GN auto markets/housing: rental market data supports the view that holding costs are rising. Toby Balazs of the Real Estate Institute of Victoria noted the difficulty in generating competitive yields. He warned that capital may shift to other states. This could reduce rental choice and increase pressure on tenants in Victoria.
Rent deduction ratio hits 62%
Interest deductions accounted for 62 cents of every dollar of gross rent in 2023-24. This left only 38 cents to cover other deductible costs. The high proportion of interest expense defines the current financial landscape. It signals a structural change in the viability of investment property in the state.
