Investment property owners are selling up in Victoria to avoid increased taxes and buying in South Australia instead, according to real estate agents.

And its believed to be inflating housing prices in SA and discouraging development in Victoria.

New figures from PropTrack showed that house and unit prices continued to increase in SA in September, with the average sale price increasing by 15 per cent in Adelaide and 10.8 per cent in regional areas of the state over the past year.

Prices fell 1.8 per cent in Melbourne and 1.3 per cent in the rest of Victoria over the same period.

Mount Gambier is SA's second-largest city and lies just 18 kilometres west of the Victorian border.

Local real estate agent Al Lamond said Victorians were becoming aware of the opportunities in the city, which had seen investment, particularly in the forestry industry.

He said they also wanted to avoid tax increases.

The Victorian government last year raised land tax rates and lowered the threshold at which they applied.

"SA as a whole is very much open to the investors now," Mr Lamond said.

"So we're finding that a lot of those investors are wanting to invest in particularly Mount Gambier, because you can buy something for $450,000–$500,000 and get $450–$500 a week rental return, which is still a good return on your money.

"And they expect to obviously have that capital growth over the next 5–10 years as well."

This increase in interest from Victoria was making it harder for South Australians wanting to buy homes, he said, especially at the higher end of the market.

"A lot of the interstate investors that are coming here, they're pre-approved, they're ready to go, they're ready to buy," he said.

"If you're a local person, try and get everything done first before you go looking and that will put you in a better stead with the vendors."

Changes hit Victorian landlords

Real Estate Institute of Victoria chief executive Kelly Ryan said the taxes came on top of higher minimum standards for properties introduced by the Victorian government, plus rent freezes during the COVID-19 pandemic, rules making it harder to evict tenants and a tax on vacant properties.

"The cumulative effect of all of those changes in the Victorian landscape means that a number of investors no longer see Victoria as a viable place to invest and, as a result, are selling their properties," she said.

Ms Ryan said the lower prices could make it easier for first home buyers in the short term, but in the long term, there would be fewer houses and units built in Victoria. 

"The private investors are critical to the success of any housing need in any state and, at the moment, we're seeing the private investors … leaving Victoria," she said.

"Then unfortunately, the commercial investors aren't seeing it as a viable opportunity to invest in either.

"So reaching the housing targets that I know our state has — as do many others — is going to be incredibly difficult."

Opposite fortunes

The Barossa Valley, Yorke Peninsula and Mid North regions had the biggest price growths in regional SA over the the past year.

"Those looking to buy might find that the price of a home they were looking at some time ago has continued to increase," PropTrack senior economist Eleanor Creagh said.

The average home sale in regional SA from October 2023–September 2024 was $441,000, according to PropTrack, compared with $575,000 in regional Victoria.

The biggest falls in Victoria were in Geelong and Ballarat, at over 3 per cent.

A Victorian government spokesman said investment property owners had more capacity to pay taxes than owner-occupiers.

"Victoria is the best place in the country to be a first home buyer — in the last financial year we accounted for more than 30 per cent of first home buyer loans in Australia, more than any other state," he said.

"Recent CoreLogic data shows housing is more affordable in Melbourne than any other capital city aside from Hobart and Darwin."