Report Identifies Over 64,000 Vacant Melbourne Properties
The Annual Speculative Vacancies Report, released by Prosper Australia suggests that there could be just over 64,000 properties within Melbourne that are sitting empty and unused, particularly within the inner-city areas.
This report is slightly different to others as it conducts its research based on household water consumption using data from three of Melbourne’s main metropolitan water suppliers (City West Water, South East Water and Yarra Valley Water). It determines its results on limited water usage, with its benchmark sat at residences using less than 50 litres per day over a 12 month period indicating these to be Speculative Vacancies.
This report includes those vacant properties that are currently not being advertised for rent, which short-term vacancy measures used by real estate firms may overlook. It takes into account 94.4% of 1,475,771 residential properties in 393 suburbs over the 2013 calendar year. Results show that 64,386 or 4.4% of Melbourne’s housing stock could be classed as vacant and unused.
Interestingly, the area reported to have the highest number of likely to be vacant properties based on water consumption was the Docklands. 489 properties (17%) were reported to use no water during 2013, whilst 27% used less than 50 litres per day. Other inner city areas with a high level of vacant homes include Flemington, West Melbourne and Abbotsford.
This area is home to one of the largest urban renewal projects across Australia and it is suggested that the Docklands may have such a high vacancy rate because of a large proportion of apartments bought by property investors. The area is catered for singles or couples and not for families with children due to the lack of schooling and amenities within the vicinity.
It is also not a very affordable area to live with the report stating that “the median rent a tenant can expect to pay to live in a one-bedroom Docklands’ apartment, is $432 per week, or a two-bedroom apartment, $530 per week...For a tenant in the Docklands, this would necessitate an after-tax income of over $70,000 just to rent a one bedroom flat”.
One reason as to why vacancy is high is that sometimes finding a tenant to rent a property can be quite time-consuming, costly and more hassle than it’s worth. Investors therefore are waiting for the capital gains of a property, which could actually be worth far more than a rental income, especially with housing prices increasing.
Another reason to vacant properties is that people may only stay in the apartment briefly and then travel for work so rarely use their property. A third reason could be elderly people who may have passed away and their families unsure of what to do with the property.
In order to help the situation, Prosper suggests that an adjustment of the housing/taxation system is required to free-up supply and reduce incentives to speculate. Prosper also recommends that states should implement broad-based land value taxes to increase holding costs, thereby discouraging vagrancy.
"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."
Published on 14th of November 2014 by Marty Stanowich