Selling your investment property due to land tax hikes? 5 ASX shares I'd buy with the proceeds

If you're fleeing new land taxes, I'd pick these five shares as replacements.

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Owning an investment property in the state of Victoria became far more expensive in 2024. Thanks to changes announced last year, landowners have faced a significant hike in land tax since 1 January.

According to reporting in The Age, even owners of second homes or investment properties worth between $50,000 and $100,000 will now have to pay a flat $500 annual land tax. For anyone owning a second home or investment property worth more than $1 million, the land tax hike is reportedly worth up to $1,675 in additional annual costs.

As such, many property investors may be deciding to sell down or out of their real estate portfolios, and move into ASX shares instead.

I can't admit to owning any property in Victoria. But if I did and I was currently selling some land thanks to these tax hikes, here are the five ASX shares I'd consider buying instead. Property has historically delivered both income and capital growth, so that's what I'd be seeking from my ASX shares as well.

5 ASX shares to buy for investors hit by land tax hikes

Starting off, my first choice would be Washington H. Soul Pattinson and Co Ltd (ASX: SOL). This ASX 200 investing house is a long-term favourite of mine, and a share that I would happily recommend to any investor, not just those affected by the land tax hikes.

Soul Patts runs a huge portfolio of different assets on behalf of its investors. These include other ASX shares, as well as property, private credit and venture capital investments.

This company has delivered significant capital growth over the past two decades, as well as a 23-year streak of annual dividend pay rises.

Next, I'd consider National Storage REIT (ASX: NSR). This real estate investment trust (REIT) allows investors to get exposure to property assets without the risk of any direct land tax hikes. National Storage owns a vast network of personal storage facilities around Australia. It is the largest single provider of such services in the country.

With low overhead costs and reasonably consistent demand, I think this is a great business to get a slice of. National Storage units are currently offering a distribution yield of around 4.7%.

MFF Capital Investments Ltd (ASX: MFF) is number three on our list of land tax hike replacements. This listed investment company (LIC) is another one of my favourite personal investments. It holds a portfolio of mostly US shares on behalf of its shareholders. These US shares are selected on their high quality and include names like American Express, Mastercard, Amazon and Alphabet.

Investors have enjoyed some pleasing returns in recent years, with MFF shares up more than 38% since March 2023. The company has been steadily increasing its dividend every year as well, with MFF shares today offering a fully-franked yield of 2.73%.

Chasing both growth and income

Wesfarmers Ltd (ASX: WES) is another stock investors who are selling up their properties to avoid those land tax hikes may want to take a look at. Wesfarmers is one of the most diversified blue chip shares on the ASX. It owns retail icons like Bunnings, Target, Kmart and OfficeWorks. But it also has its fingers in many other pies, including lithium, gas distribution, work wear and chemical and fertiliser production.

It has a long history of delivering both healthy capital growth and reliable dividend income to its shareholders. It also offers diversification that few other single ASX shares can match.

Finally, I think property investors who are fleeing land tax hikes can happily invest in an ASX index fund like the Vanguard Australian Shares Index ETF (ASX: VAS). This exchange-traded fund (ETF) gives investors exposure to the largest 30 companies on the ASX. That's everything from Wesfarmers and Soul Patts to JB Hi-Fi Ltd (ASX: JBH) and AGL Energy Ltd (ASX: AGL).

An index fund like VAS can be expected to deliver a return that is in line with the average of the entire Australian share market. Investors have enjoyed an almost even split between capital growth and franked dividend income from this index fund over many years. What more could you want from an investment to replace your property?

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. American Express is an advertising partner of The Ascent, a Motley Fool company. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Motley Fool contributor Sebastian Bowen has positions in Alphabet, Amazon, American Express, Mastercard, Mff Capital Investments, Vanguard Australian Shares Index ETF, Wesfarmers and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Amazon, Mastercard, Washington H. Soul Pattinson and Company Limited, and Wesfarmers. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended the following options: long January 2025 $370 calls on Mastercard and short January 2025 $380 calls on Mastercard. The Motley Fool Australia has positions in and has recommended Washington H. Soul Pattinson and Company Limited and Wesfarmers. The Motley Fool Australia has recommended Alphabet, Amazon, Jb Hi-Fi, and Mastercard. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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