Over 64,000 Melbourne properties sit vacant: Prosper Australia

Over 64,000 Melbourne properties sit vacant: Prosper Australia
Jessie RichardsonDecember 7, 2020

A new study suggests 64,386 properties in Melbourne are likely be sitting empty.

Prosper Australia, a land policy lobby group, conducted the research for the 2014 Speculative Vacancies Report using the amount of water consumed per houseshold.

According to the report, the Docklands area has the highest proportion of properties that are likely to be vacant based on water consumption, with 489 residences using no water at all in 2013 – 17% of the properties connected to a provider.

The vacancy rates recorded using Prosper's water use method doubled in Docklands, Abbotsford and West Melbourne over 2013, tripling in Highett. The water use method allowed the study to capture vacant properties that are not currently advertised for rent.

The report's author Catherine Cashmore said without significant holding fees for vacant properties, investors may not have incentives to rent out their properties.

"I suspect that there is a proportion of foreign investment holding properties vacant," Cashmore told Property Observer.

"But it could be local investors, for whom the capital gains of a property far outweigh the rental income. A rental property might earn you $18,000 or $19,000 a year, but the median house price this year has gone up by $60,000. The gains are quite significant.

"Renting a property quite often can be more trouble than it's worth," she said, explaining some investors may choose not to rent out their properties due to property management costs and previous problems with teantns.

"Some properties within the Docklands might even find it difficult to find tenants – they're generally low grade and not great to live in."

She also said properties sometimes stay vacant if their owners are elderly or have passed away, and the family is unsure what to do with the property. In her experience, new or young Australian buyers often do purchase investment properties with the intention of renting them.

But as older investors pay down their debts, and have neither the time nor money to manage their properties, they may consider leaving them vacant.

With small apartments increasingly common in Melbourne's inner city, Cashmore also noted that while developers and policy makers often claim inner city apartment development is catering to the the rising single-household demographic, the stock is inappropriate for those who need it. In fact, she said, the majority of single person households actually populated by elderly residents.

"A lot of single person households are actually widows in three or four bedroom houses," she explained.

"But the demographic of people who live in high density apartments – figures peak at around 27 years."

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Source: Prosper Australia.

According to Cashmore, the most effective way to change the current number of vacant properties in Melbourne is to adjust taxation policy.

The report estimates 4.4% of Melbourne's total housing stock is vacant.

"This level of latent supply is not usually identified outside of a significant downturn in economic activity. Yet, if the latent supply of withheld land were put to effective use, it would theoretically reduce cost-of-living pressures for tens-of- thousands of low-income families forced to live at the margins," the report states.

"In light of this, government inaction on Australia's housing affordability crisis is indefensible.  Access to affordable shelter is a basic human right and vital to the prosperity of our nation."

The report recommends tax reform to ease volatile boom and bust cycles based on speculation and "unsustainable levels of debt".

"We submit that these causes would be alleviated or removed if current transaction taxes were replaced with a holding tax levied on the unimproved value of land."

According to Prosper's report, a broad base, "low flat-rate no threshold" state land tax should be implemented, replacing the current progressive land tax scale, which can be passed along to tenants.

"This would act as a disincentive to withhold properties from use, with escalating land prices increasing the relative holding costspredictable and less volatile that stamp duties, which are dependent on the volume of housing transfers in addition to the transacted price.

"This would act as a disincentive to withhold properties from use, with escalating land prices increasing the relative holding costs," the report states.

Cashmore believes it's up to the government to reduce the level of unused property and affordability pressures.

"You've got to question a large proportion of prime urban land has a high published vacancy rate," she said.

"You add that onto the property that's being sold and not for rent.

"What a waste of land. And we need to question that," said Cashmore.

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