Landlords are fleeing Victoria’s property market as they are hit with higher land taxes. Some landlords are passing on the higher costs to renters, or leaving the market altogether.

Garry Salathiel has two investment properties in Wangaratta, a country town in northeast Victoria, with one currently rented out. He told Yahoo Finance skyrocketing land taxes were putting his finances under pressure.

“Land tax has gone from $397, to $600, to $3,096 in the last three years,” he said. “The $3,096 absolutely floored me.”

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The 72-year-old builder has planned to retire later this year and said higher land taxes meant he was now considering selling up. He has drawn from his superannuation savings to help pay off his mortgages and now doesn’t have any more cash to spare.

“This is the last straw … I’ll have to sell something to live. So when I retire, something’s got to go,” he said.

In the meantime, the dad-of-four said he will have to pass on half of the increased taxes to his existing tenants. He acknowledged some people won’t agree with his decision, but said he can’t keep absorbing the extra costs himself.

“I’m just giving heaps and heaps and heaps of it away to the government for nothing. I’m paying a real estate agent, I’m paying the council, I’m paying insurance, I’m paying the land tax. There’s nothing left,” he said.

Land tax clawing $5.65 billion from investors

The Victorian government hiked land taxes at the start of the year as part of a temporary measure to pay down COVID-19 debt.

Victorians who own a second home or investment property now have to pay a $500 annual tax for properties with a land value of between $50,000 and $100,000.

That increases to $975 for homes valued between $100,000 and $300,000, plus 0.1 per cent of the land value for properties worth more than $300,000.

The government forecast that 860,000 Victorians would be affected, including 380,000 first-time taxpayers. It’s expected to claw back $5.65 billion through the tax.

‘Huge impact’ on landlords

James Kirkland, general manager of sales at Little Real Estate, said higher land taxes were having a “huge impact” on Victorian investors, with many deciding to sell.

“Our percentage of investments coming to market in Victoria is by far the highest percentage. As we talk to investors and consult with our clients as to why, it’s largely to do with the holding costs and the impact it’s having on yields,” Kirkland told Yahoo Finance.