Portfolios in transition: Property investors are diversifying amid regulatory and tax changes

While Melbourne remains a central pillar of the Australian property market, a shifting regulatory and tax environment is prompting a new era of portfolio management. For many of Victoria’s high-end investors, the focus has shifted from local consolidation to strategic interstate diversification.

The narrative for Victorian property is currently one of transition. Wealthy property owners are increasingly looking at a multi-state approach in response to recent shifts in state government levies and rental reforms.

With land tax revenue now projected to hit record highs and the threshold remaining at $50,000, the $20 million-plus property elite, as a result, are diversifying into NSW and Queensland to reset their tax-free thresholds.

Elevate your living experience with our digital magazines

Browse Domain’s property and lifestyle magazines.

Read now

“Anecdotally, we know there’s been a big turnover of owners in Melbourne,” says Ben Kingsley, chair of the Property Investors Council of Australia (PICA).

“Maybe some of these longer-term investors have enjoyed solid capital growth over the last 15 to 20 years, but they’re now reconsidering because of the challenges of investing in Victoria.

“There’s the increasing land tax from COVID debt repayment, the tax-free threshold dropping from $300,000 to $50,000 with a surcharge for high-value properties, expanded vacant land taxes, short-stay levies, a sharp rise in other levies and charges, and more restrictive conditions on landlords.

“Investors no longer feel they have any control over their own properties.”

This recalibration comes as Melbourne enters a softer phase of the growth cycle compared to other capitals. According to PICA figures, the city’s cumulative growth in dwelling value from January 2022 to December 2025 was 3.5 per cent, while markets like Perth (77.1 per cent), Adelaide (54.3 per cent), and Brisbane (46.7 per cent) saw significant surges.

In terms of investor costs, the two other east-coast states can look much more inviting. In Queensland, for instance, the tax-free threshold is $600,000 for the annual holding costs of a multi-property portfolio, while in NSW it starts at $1.075 million.

In addition, the top marginal rate or premium threshold – the point at which the highest land tax rate applies – is set at $3 million in Victoria, as against $6.571 million in NSW and $10 million in Queensland.

“We’ve had a lot of affluent buyers from Melbourne saying they’re fed up with the taxes and coming to buy luxury properties on the Gold Coast,” says Kollosche agent Matt Follent. “It’s been quite strong for the last 12 months, with some big sales of over $15 million and $16 million.

“They might keep a small bolthole in Melbourne, but they’ll buy large properties here as they can choose where to live and work from.”

A simple calculation of land taxes for a typical unimproved land value of, say, $11 million, which could end up worth $20 million when developed, shows why the border-hopping arbitrage may be happening. Investors would be paying roughly $175,616 in land tax in NSW, $172,500 in Queensland, and $240,560 in Victoria.

“The holding costs of land aren’t cheap, there’s no question about that,” says Sydney tax lawyer Michael McKee, a partner at Brown Wright Stein Lawyers.

“Victoria’s 2.65 per cent land tax rate for land holdings valued at over $3 million is a decent amount of money to find. In NSW, it’s 2 per cent above the $6.571 million threshold.

“I think that’s definitely been a significant factor in the furore around a lot of the taxes the Victorian government has brought in. I’ve certainly come across a lot of people in Victoria who are disgruntled about those.”

The annual property investor sentiment survey conducted by Property Investment Professionals of Australia (PIPA) found that 22 per cent of Victorian investors had sold at least one property in the previous 12 months, appreciably higher than the national 16.7 per cent.

PIPA chair Cate Bakos says Victoria is experiencing softer conditions in the prestige and inner-city apartment markets, but in NSW, “buyer demand remains firm despite affordability pressures”.

“Queensland continues to surge, fuelled by intense buyer competition and government incentives, with Brisbane homes often selling within one week of the first open home,” she says.

It may well be that Victorian buyers, shunning their home state in preference for NSW and Queensland, are fuelling that demand. Amir Ishak, principal advisor at Property Tax Specialists Australia, says, “It does sound sensible that that’s happening.

“If you’re careful about costs, those tax differences can make a big difference. It makes sense that people are buying more in NSW and Queensland to save on land tax, everything else being equal.”