A Warrnambool developer says he could be forced to take his business interstate - putting a handbrake on the city's housing market - if the state government pushes ahead with its new windfall tax.
But it's not just developers who are alarmed about the new tax on rezoned land for housing estates and its potential to drive up prices even more in an already squeezed housing market.
Farmers on the edge of town fear they will face hefty tax bills even if they never intend to turn their farms into housing estates.
"It will just ruin the housing industry," developer Graeme Rodger said.
As part of the state budget, the government announced the new windfall gains tax which it said would claw back about $40 million a year.
"When governments make planning decisions to rezone ex-industrial land, or create new residential estates, property developers can make massive windfall profits overnight," the government said when it unveiled the plan.
It means developers and speculators would face a windfall gains tax of up to 50 per cent applied to planning decisions to rezone land from July 1, 2022.
"The total value uplift from a rezoning decision will be taxed at 50 per cent for windfalls above $500,000, with the tax phasing in from $100,000 - ensuring the vast majority of landholders will not be affected," the government said.
Land subject to the Growth Areas Infrastructure Contribution will not be affected, but locals fear that just means it's a tax on regional areas and not the city.
Mr Rodger, who has being creating subdivisions for 55 years and employs 130 people, said the tax would increase the cost of a block in Warrnambool by as much as $30,000.
"It will stop my company from investing into residential real estate in the future and it will push us interstate," he said.
"We'll still be a business but we won't do it in Victoria because we won't be able to afford to."
Mr Rodger said it could be up to eight years before a developer started to make money out of a block of land it had bought to develop, and now it would have to bare the cost of the new tax on top of that.
"We've got to carry it for eight years. He just doesn't understand. It's just unfair," he said.
"Warrnambool is going through an unprecedented expansion in land, and it will just bring that to a halt."
Mr Rodger said he had previously done developments in other states which welcomed developers with open arms.
Ray White real estate agent Jason Thwaites said the state government's tax plan would end up hitting buyers as well as developers.
"I don't think you can understate the amount of pressure it's going to have on land development and that just flows right through the whole economy," he said.
"It's going to be passed on somewhere and that's going to put more and more pressure on the land development and freeing up of the existing housing stock.
"It will have an enormous flow-on effect."
South West Coast MP Roma Britnell said she was concerned about the flow-on effects it would have on the availability of housing.
She said there were more than 800 people on the housing waiting list and the government's $25 million investment into public housing was only likely to bring 75 new properties to ease the problem.
"We have got a massive crisis on our hands," she said.
"We are absolutely hamstrung.
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"We have no land and it takes an incredibly long time for land to go from paddocks to development and blocks that can have houses constructed on them."
Ms Britnell said the government had blown out so many projects that it was so far in the red it was looking for ways to tax anyone.
She said if you were a family in Warrnambool who bought a block of land 25 years ago for $1 million on the outskirts of town, that's now worth $20 million.
Under the government's new tax, they would now take 50 per cent of the increased value of $19 million," Ms Britnell said.
"It will stop them from selling it," she said. "We're paying the price in regional Victoria.
"The reality is if you can't build houses, then there's no more houses for growth, jobs. It effects the whole downstream and social housing as well."
Ms Britnell said it would put a handbrake on development in Warrnambool.
She said the government was yet to release details about the legislation.
The government has been contacted for comment.
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