The Speculative Vacancies in Melbourne report, now in its sixth year, looked at water use data from Melbourne’s big water retailers.
It found “64,465 properties were potentially unused over the study period, having consumed less than 50 litres of water a day, and 12,691 properties did not use any water, and were demonstrably unoccupied”.
Average household water consumption in Melbourne is estimated at 419 litres a day.”
Our 50L per day per household cutoff level is conservative at 8 times less than average household consumption. In an era of housing supply concern, it is important governments look at the efficient use of housing. This need is exemplified by the role investors are playing in the housing market, now averaging over 36% of all housing loans whilst first home owners are bumping along at just 13%.
“The annual increase in the capital value of the land under a property can outrun the net rental income,” it said. “An investor may calculate it is profitable to purchase a property exclusively for the potential capital gains.
“A substantial land value tax would blunt capital appreciation and serve as a withholding cost, shifting the incentive to profit from rental income rather than capital gain.”
Karl Fitzgerald, of Prosper Australia, said the results showed there were many properties not being used efficiently for housing.
“We feel it is time the government looked seriously at this hidden [housing] supply,” he said.
He said there was a housing “distribution issue”, not a supply issue.
“We are strong believers that stamp duty must be replaced with a land tax,” he said.
A broad based Land Tax would add pressure to idle property owners. At present holding charges are barely $1500 versus capital gains of some $20,000 – 30,000 p.a. Not all investors hold properties empty, but if large investors leave 10 – 20% of their portfolio vacant, this assists to manufacture scarcity. Why would an owner risk damage to their kitchen, bathroom if they have just an 18 month investment plan to flip the property?
Stamp Duty is an impediment to property turnover, to moving house – something that many in the property industry agree on. A broad based Land Tax could fund its removal and place a sense of urgency upon property investors to earn rental income.
We hope you can attend our event tonight at 6.30pm to learn more about how we can assist affordability by utilising the latent supply of housing we already have.