If there has been one location that has been in the news – and in not in a good way – more than anywhere else because of the of the parlous state of its sales and rental markets this year it is Victoria.

The Victorian market has been variously described as “challenging” and even “toxic” by some commentators, however, as I written about this year, there are areas that remain ripe for strategic property investment such as Geelong.

A key part of the reason why Victoria’s market is a bit on the nose – to put it politely – is the introduction of its new “temporary” land tax that is due to last a decade! I think someone in the Allan Government needs to look up a dictionary to learn what that word actually means.

However, there is no denying that Victoria has introduced more rental reforms – more than 130 seemingly – than any other major jurisdiction over the past few years, with many of these legislative changes seen as being unfair to property investors.

This is the why we have seen an exodus of investors from Victoria over the past year or two.

And, while we have witnessed a resurgence of investor interest in Melbourne recently because of its affordability, substantial due diligence is required before proceeding – especially when there are myriad other markets offering excellent property investment opportunities.

Below is helpful summary of some of the proposed rental reforms from the Consumer and Planning Legislation Amendment (Housing Statement Reform Bill) that every property investor needs to know. 

Rent increase criteria

There will be stricter criteria when rent increase reviews are undertaken by Consumer Affairs Victoria (CAV) and the Victorian Civil and Administrative Tribunal (VCAT).

Extended notice periods

Notices of rent increases and notices to vacate will be extended from 60 to 90 days.

Rental standards

Rental properties will have to meet minimum rental standards before being advertised.

Personal information

There will be restrictions on unnecessary or excessive data collection for rental applications. New provisions will increase data protections and the mandatory destruction and de-identification of renters’ personal information.

Ban on fees

Rental application fees and rent payment fees will be prohibited.

Changes to notice to leave reasons

Notice to leaves will require valid and justifiable reasons, which you can learn more about here.

Rental bidding bans

Prohibitions on accepting or soliciting rental bids above the listed price. This will include where prospective renters approach agents with increased offers.

Impact on investors

It’s important to understand that these latest reforms have not become law – yet – but it is highly likely they will given the state government’s balance of power and overall policy agenda.

While many of these reforms have been enacted in other states and territories, given the underwhelming returns for Victorian investors at present, they may have additional implications.

Increased costs

Investors may face higher costs due to the need to meet new minimum rental standards, such as improved insulation and energy efficiency, before a property is advertised for sale. These upgrades can be expensive and potentially could cost thousands of dollars.

Stricter regulations

The reforms introduce stricter regulations, including extended notice periods for rent increases and evictions, and the requirement for valid reasons for evictions, which could limit an investor’s flexibility in managing their properties.

Potential market exit

Some investors might choose to exit the rental market due to the increased regulatory burden and costs, which could reduce the overall supply of rental properties, potentially leading to higher rents and less availability for tenants.

Impact on single property investors

Most investors own just one rental property, so, these increased costs and regulations might disproportionately affect them, making it harder to maintain their investments.

Minimum standards’ costs

Meeting the new rental standards in Victoria can be quite costly for investors.

The installation of ceiling insulation, draught proofing, heating and cooling as well as hot water systems may require an investment of $10,000 or more to fully comply with the new standards.

However, these costs can vary significantly based on the property’s current condition and the specific upgrades required.

While these rental reforms may appear onerous, for any investor who has been in the market over the medium-term or those considering Victoria as a long-term property investment location, it is important to remember that legislative changes are part and parcel of an investor’s journey.

What really matters is selecting the very best area and dwelling type for your goals and maintaining your focus on the potential outcome 10, 20, or 30 years down the road.