Government Policies Blamed for Melbourne Property Woes

Melbourne’s prolonged property underperformance is increasingly being linked by industry figures to a combination of higher taxes, construction costs, expensive finance and policy uncertainty, all of which can affect whether new developments remain commercially viable.

Alba founder Tom Mifsud recently argued that government decisions have played a significant role in weakening investor confidence in Melbourne. He said high land, construction and finance costs are making some developments financially difficult to justify, particularly when expected sale values no longer provide sufficient margins.

His comments reflect a broader concern within the property development sector. Developers must assess not only the cost of buying land and constructing homes, but also finance expenses, taxes, infrastructure contributions, approval delays and the risk that property values may change before a project is completed.

When those costs rise faster than expected sale prices, projects that appear attractive on paper can become unviable. In these circumstances, developers may delay construction, reduce the scale of projects or redirect capital to other locations where the financial outlook appears more predictable.

Recent Property Council analysis of Footscray reached a similar conclusion, identifying high construction costs, taxes and charges, expensive finance and subdued property values as factors preventing some projects from proceeding despite strong underlying demand and substantial infrastructure investment.

For Melbourne’s western growth corridor, this issue is particularly important because future housing supply depends heavily on private investment. Large greenfield estates, townhouse projects, apartments and mixed-use developments generally require substantial capital well before completed properties can be sold.

Policy stability therefore becomes an important part of development decision-making. Investors and developers typically model projects over several years, meaning unexpected changes to taxes, regulations or infrastructure costs can materially affect the final return.

The Productivity Commission has also highlighted how slow approvals, poorly coordinated infrastructure and complex regulation can delay housing projects and increase development costs. Its 2026 housing supply review noted an example of a 1,600-lot development in Melbourne’s growth corridor where approvals reportedly added more than three years to the project timeline.

For Melbourne’s west, delays of this scale can be particularly significant because land holding and finance costs continue to accumulate while developers wait. The longer a project remains in the approval or infrastructure stage, the greater the risk that changing interest rates, construction costs or buyer demand will affect its viability.

This creates a direct connection between developer confidence and future housing supply. If investors believe policy settings are unpredictable or project margins are too narrow, fewer developments may progress from planning into construction.

For buyers, the long-term consequence could be reduced housing choice. If new supply fails to keep pace with population growth, pressure can eventually return to both purchase prices and rents even if the market is temporarily experiencing weaker values.

For landowners and builders across the western growth corridor, stronger development confidence could have the opposite effect. More viable projects can support land sales, construction activity, employment and the delivery of new homes and infrastructure.

However, government policy is only one part of the equation. Interest rates, construction labour shortages, material costs, buyer demand and access to finance also play major roles in determining whether a development proceeds.

This means Melbourne’s recent underperformance cannot be attributed to a single cause. Mifsud’s comments represent one industry perspective, while broader market evidence shows that both economic conditions and regulatory settings are influencing development feasibility.

For Melbourne’s western growth corridor, the key issue is whether developers can achieve enough certainty around costs, approvals, taxation and future demand to commit capital confidently.

Overall, a stable investment environment combined with efficient approvals, coordinated infrastructure and commercially realistic development costs will be important if Melbourne’s west is to continue delivering the level of housing required for its long-term population growth.