“The percentage of people purchasing holiday homes two to four years ago made up probably almost 80 per cent of our sales. That may account for some 15 to 20 per cent now,” Smith said.
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“It’s just not as appealing … the real cost of holding a second home in Victoria has tripled in the last two years,” he said.
“If you’re buying a holiday home for $3 million, you’re already contributing about $170,000 in stamp duty straight away and then on top of that, a fairly onerous land tax … the land tax has been a tipping point, I think, for a lot of people.”
Smith said while the median house price on the Mornington Peninsula had softened, he was seeing a higher than average number of listings for sale.
“It’s sad because some of them are generational holiday homes. Families over the years have worked hard, saved hard, bought a home, and now they’re looking at a cost of $1000 to $1500 a month, just for the privilege of having a second home, and that’s without doing any maintenance, that’s just land tax rates and insurance,” he said.
Smith said that regardless of whether second homes were rented out via a short stay accommodation platform like Airbnb or left vacant throughout the year, owners were being hit with taxes many can’t afford.
Clearance rates have returned to a pre-pandemic level on the Mornington Peninsula. Credit: Justin McManus
PEXA chief economist Julie Toth said changes to land tax earlier this year had adversely affected areas like the Mornington Peninsula, with homeowners and investors alike hit with extra costs.
“We are hearing anecdotally of people getting bills for several thousand dollars that they’re not expecting, and it may be for an older home that has been in the family for a long time, and they haven’t had to pay that before,” Toth said.
“When property cycles turn, we do typically see the first turning points in areas with high numbers of holiday homes and second homes,” she said.
“Even if you’re lucky enough to have a second property, you may not have that kind of money available to pay this additional bill and if you can’t qualify for an exemption, then it would be a reason to consider either renting it out or selling it.”
Second homes are exempt from vacant residential land tax if the property is occupied by the owner as a holiday home for at least four weeks in a calendar year, according to the State Revenue Office website.
Toth added that many investors were looking interstate to avoid being slugged with Victoria’s land tax.
Peninsula Sotheby’s International Realty managing director Rob Curtain said while holiday-home owners were selling up, the local market remained strong with an influx of permanent residents moving to the coast.
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“Plus people that are either being impacted by higher interest rates or land tax,” Curtain said. “People are now deciding that [a weekend holiday home] is a very expensive item in their portfolio to maintain if they’re not using it … it’s not just the land tax, it’s the cost of owning and maintaining it.”
Curtain agreed the Mornington Peninsula was a more stable market following the volatility of house prices and record demand during the pandemic.