Victoria’s rental market has seen a dramatic shake‑up. In 2024 the state recorded its sharpest fall in rental supply on record – roughly 21,000–25,000 fewer rental homes on the market. Industry sources say this ‘landlord exodus’ is linked to recent policy changes. Over 130 tenancy law reforms since 2019 have added new landlord obligations, while a steep increase in land taxes has bitten into returns. Prominent investors like Danny Wallis (known from The Block) have openly cited these factors as their reason for selling up.
The numbers tell the story: active rental bonds in Victoria fell from about 676,400 to 654,700 in a year. The Property Investment Professionals of Australia (PIPA) found 22% of Melbourne investors sold at least one home in 2023–24 (one of the highest rates in Australia). PIPA’s Cate Bakos said “legislative changes around minimum rental standards and increased land taxes” are driving investors out of Victoria. Real Estate Institute of Victoria boss Kelly Ryan confirms this trend: agents report that the bulk of recent rental sales have been by landlords, who are increasingly looking to “invest in other states outside of Victoria”. Ryan warned, “It’s a massive issue because renters are going to have less choice” if the exodus continues.
Tough New Minimum Standards and Compliance Costs
Victoria has introduced extensive new standards for rental homes. From March 2021 onwards, every rental must meet 14 categories of “minimum standards” covering things like kitchen and bathroom facilities, window coverings, security, and hygiene. More stringent requirements kicked in March 2023: for example, all rental homes must have a fixed heater in the main living area – and for leases signed after 29 March 2023 that heater must be a 2‑star (or higher) energy‑efficient model. Likewise, every rental’s electrical switchboard must now have modern circuit breakers and residual-current devices (RCDs). Properties with older fuse boards may need full rewiring to comply. Landlords must engage licensed tradespeople to perform safety checks: an electrical safety check is required every two years, plus a gas safety inspection biennially and an annual smoke-alarm check.
Examples of recent standards:
- Heating: A working fixed heater is mandatory in the main living area, and by 2023 all new leases require a minimum 2-star efficient heater (or a non-ducted 2-star air conditioner, etc.).
- Electrical: Since 2023 landlords must ensure “modern switchboards” with RCDs are installed. A licensed electrician must inspect wiring every two years.
- Safety checks: Biennial electrician and gasfitter safety checks, plus annual smoke-alarm tests, are now mandated.
The government is also consulting on even tougher rules. From late 2025 proposed changes would mandate ceiling insulation, draught‑proofing, upgraded hot-water and air-conditioning systems, 4‑star showerheads and blind‑cord safety anchors. Energy Minister Lily D’Ambrosio notes these upgrades would reduce renters’ bills, estimating a $5,000 per-home cost (staged over time) to save renters about $567 a year on power. Tenant advocates like Tenants Victoria welcome the reforms: director Farah Farouque said renters “need better requirements for ceiling insulation and sealings” to avoid extreme heat or cold in their homes.
But landlords complain the burden is heavy. The Victorian Chamber of Commerce and Industry (VCCI) has estimated up to $30,000 per home in upgrade bills under the new standards, while the state government’s own analysis suggests more modest costs (around $5,000). Either way, many say even a few thousand dollars of outlay is hard to fund on tight rental yields. PICA Chair Ben Kingsley points out that many ordinary investors (often teachers, nurses, police officers, etc.) simply can’t afford these “required upgrades” on top of insurance, rates and the new land tax. As Kingsley notes, “most teachers and nurses did not earn enough to cover the required upgrades plus the other costs… such as insurance and land tax”.
Hiked Land Taxes and Other Levies
On top of compliance costs, Victorian landlords face a major tax hit. The 2023 budget introduced a 10-year COVID levy cutting the tax-free land tax threshold from $300,000 to $50,000 for secondary homes and investors. In practice this means nearly every rental property now attracts land tax. For example, on an unimproved land value of $500,000 the levy adds about $1,175 per year in tax. The government expected this change to hit “almost half a million investors” and raise nearly $4.74 billion over four years. Many landlords view this as the last straw.
One high-profile case is renovation investor Danny Wallis. Wallis has publicly blamed the higher land tax for his decision to quit the Victorian rental market. On listing one of his Melbourne homes he told the media: “I’m saving on Daniel Andrews’s land tax… I’m going to sell because I’m sick of the land tax going up and up and up”. He added bluntly, “I’m going to move all my investments out of Victoria”. Wallis notes wryly that he faces a rental housing crisis – “it’s dumb there’s a rental crisis and I’ve got to sell when so many people are looking for homes” – but sees few alternatives as costs pile up. “I know so many landlords who are selling because of the land tax,” he said. In short, landlords say the combination of new regulations and steeper taxes has slashed the appeal of holding property in Victoria.
Industry Voices and Data
Property economists and agents are sounding the alarm. PropTrack’s senior economist Eleanor Creagh points to Victoria’s “rising property taxes, stricter rental standards and sustained high interest rates” as key reasons investment property ownership has become “less attractive and more expensive”. Her analysis shows that in the year to June 2024 there were 50,000 new investor loans but 21,712 fewer active rental bonds – implying up to 70,000 landlords may have sold homes in that period. She notes this is the first recorded decline in rental bonds since 1999, reflecting an unusually high sales churn among investors. Creagh observed that the state “currently has the highest property taxes in Australia” and that many landlords have “struggled to keep up with significantly increased costs from minimum rental property standards legislation”.
Real estate bodies echo these concerns. Kelly Ryan of the Real Estate Institute of Victoria says agents saw “unprecedented” numbers of rental listings as owners got out. She predicts even more investors will sell in 2025 if nothing changes. Property Investors Council chair Ben Kingsley is equally blunt – he labels the collapse in rental stock as “appalling” and warns it has driven “tens of billions” of investment into other states and sectors. In an ABC interview Kingsley put it starkly: “The investors are basically voting with their feet and their wallets, and they are tapping out”.
Even mainstream analysts see the impact. CoreLogic’s Tim Lawless noted that while rents have momentarily eased (due to other factors), the supply crunch is unmistakable. He warned that a rising share of Victoria’s landlords are “double-thinking” whether property is worth it in the state. And indeed, PIPA’s nationwide investor survey found Victoria to be “the least accommodating state or territory for property investors”. In Melbourne alone, about 22% of landlords sold in the last year, second only to Brisbane, and roughly 65% of those sales went to owner-occupiers, further eroding rental stock.
From Melbourne to Elsewhere: Shifting Investments
Where are landlords putting their money instead? Many say they’re simply looking out of state. Kelly Ryan reports that agents see a growing trend of investors buying in other jurisdictions, drawn by fewer rules and lower costs. Ben Kingsley estimated that “tens of billions” have shifted to cheaper markets elsewhere in Australia. For instance, Queensland and New South Wales have not matched Victoria’s heavy-handed standards or tax levies, making them more attractive for some. (A related effect is that many former investment properties are being snapped up by owner-occupiers, so the capital isn’t fleeing entirely – it’s just changing form.)
Some analysts also note landlords redeploying cash into financial assets or superannuation, where returns are less encumbered by regulation. CoreLogic’s Lawless suggests many are rethinking property as their “cup of tea” in Victoria. Anecdotally, local wealth advisors report clients choosing shares or term deposits over new investment homes, especially given global yield rises. In short, the profit calculus for the average landlord in Victoria has swung sharply.
The Tenant Perspective and Market Impacts
Of course, not everyone is unhappy. Tenant groups argue these changes were long overdue. Jennifer Beveridge of Tenants Victoria hailed the new standards as “good news” for renters, providing safer, warmer and better-maintained homes. Joel Dignam of renter advocacy group Better Renting agreed that the reforms will “work together really well… to reduce renters’ energy costs and ensure they have a healthy, comfortable home”. Environmental advocates also note that more efficient buildings will cut carbon emissions.
In the short term, however, the exodus is tightening rental supply. Greater Melbourne’s vacancy rate is historically low (about 1.2% in late 2024), and PropTrack warns that further property losses will push prices up under basic supply‑demand logic. As one property commentator bluntly put it: “when supply decreases…and demand remains steady…rental prices [will] go up”. Ironically, this supply squeeze could ultimately make renting more expensive and competitive – the very opposite of the policy intent.
Looking Ahead: Policy Debates and Investor Confidence
With the trend clear, voices on all sides are calling for a rethink. Investor bodies urge the state government to pause or roll back certain measures and revisit tax settings. (Ben Kingsley warned it will “get diabolic” unless something changes.) Some analysts suggest sweeteners or incentives may be needed to keep investors in the market. Meanwhile, tenant advocates caution against backtracking on vital protections.
Victoria’s situation is now being watched nationally. As PIPA’s survey noted, there’s a “sell-off of investment properties around the nation” – but Victoria stands out as the toughest market. For now, many landlords feel “like they’re losing their grip on their investments” under the new rules. How this drama resolves will shape the state’s housing market for years – and whether renters ultimately gain stable, affordable housing or face even fiercer competition for dwindling homes.
Sources: Victorian government and consumer-affairs websites; industry data and analyses (RealEstate.com.au, ABC News, PropTrack); commentary from REIV, PICA, Tenants Victoria and property law experts.