More than 80,000 properties in Melbourne lie vacant
According to the annual 2015 Speculative Vacancy Report by Prosper Australia, there are more than 80,000 properties in Melbourne that might be lying vacant. This is a 16,000 increase since the 2014 report and as many as one-fifth of all investor owned properties are simply lying empty.
To determine the number of vacant properties, Prosper analyses vacancy through water consumption of properties over a 12 month period. For properties with abnormally low water usage of less than 50 litres per day (LpD) over a 12 month period, these are classified as Speculative Vacancies (SVs). The 50 litres per day limit does allow for leaks and property maintenance though.
This report is based on data received from Melbourne’s three main metropolitan water retailers which include City West Water (CWW), South East Water (SEW), and Yarra Valley Water (YVW). Based on the data, Melbourne’s average per capita water usage for 2014 was 160 LpD.
According to the report, the suburb that has the highest vacancy rate is Carlton/Carlton South which has a 7.6 per cent 0LpD SV rate over the 2014 period and 14.5 per cent who use less than 50LpD.
Melbourne (CBD) and Abbotsford both had a 6.7 per cent ratio, Sandringham came in fourth with 5.7 per cent and Clyde/Clyde North was the fifth most vacant suburb with 5.5 per cent. Interestingly, Clyde/Clyde North had the highest ratio of <50LpD at 23 per cent.
A total of 1,707,140 residential properties were analysed within the report across 254 postcodes during the 2014 calendar year. Out of this total, 82,724 properties or 4.8 per cent of Melbourne’s total housing stock were vacant during this timeframe as they had consumed less than 50LpD.
24,872 properties consumed no water at all which confirmed that they were more than likely unoccupied during this timeframe.
One of the causes of this vacancy rate is due to some property investors simply preferring to hold on to their investment properties for capital growth, rather than to rent them out and generate a rental income. As many as 20% of all vacant properties are thought to be investment properties, but it is unclear as to whether these are held by foreign investors or local property investors.
The report also stated that if just those residential properties consuming 0LpD were placed onto the market for rent, then this would increase Melbourne’s actual vacancy rate to 8.3 per cent, from the 2.7 per cent vacancy rate recorded in 2014. However, if 82,724 properties used less than 50LpD were advertised for rent, then the vacancy rate could increase to a whopping 18.9 per cent.
If the 8.3 per cent vacancy rate was a reality, then it would actually demolish rental growth in Melbourne.
In spite of this rental tenants cannot rent over their capacity to pay and if there was a genuine housing shortage then we would see rising real net rents. The reality is that rents are moving in the opposite direction and either falling or stagnating.
But it’s not just residential stock that is vacant; 7,941 or 6.1 per cent of Melbourne’s commercial stock was also vacant throughout 2014 having consumed 0LpD.
“This is clear evidence land is being hoarded for profit. Up to 18.9% of all investment properties lie empty. This report demonstrates over eight years that hoarding is magnified in periods of increased speculation,” said Karl Fitzgerald, Prosper Australia’s project director.
The report also suggests there is no housing supply crisis due to 4.8 per cent of Melbourne’s houses showing under-utilisation. Instead, rising property prices indicate significant distortions created by policies supporting rent-seeking behaviour.
Docklands, which was at the top of last year’s speculative vacancies list, has moved down the list. Last year 27 per cent of its stock used less than 50 LpD; however this year it has fallen to 8.5 per cent, or a total of 3,762 properties, clearly showing that stock is starting to get absorbed.
“The incentives for property speculators to hold prime locations empty is an affront to anyone locked out of housing. The findings prove we do not have a housing supply crisis, we are literally locked out” stated Mr Fitzgerald.
Published on 14th of December 2015 by Marty Stanowich