Executive Summary

Prosper Australia’s Speculative Vacancies Report demonstrates how Government housing, tax and supply policies have allowed widespread residential and commercial vacancies in Melbourne.

Melbourne’s three main metropolitan water retailers, City West Water (CWW), South East Water (SEW), and Yarra Valley Water (YVW) made their data available for this report.

Speculative Vacancies (SVs) are assessed as properties with abnormally low water usage of less than 50 litres per day (LpD) over a 12-month period, allowing for leaks and property maintenance.[1] Average per capita water usage in Melbourne over 2014 was 160LpD. In addition, the 0LpD reading is also referenced as a determinant of absolute vacancy.

Policy makers have thus far ignored Melbourne’s Speculative Vacancies and their effect on property prices.

For eight years this report has provided a SV measure to illustrate the actual utilisation of Australia’s housing stock. This gives a fuller analysis of the housing market by including properties that are not for sale and not for rent. In a market characterised by speculation and the continuous mantra of a ‘housing supply crisis’, the need for transparency has never been greater.

Analysis was undertaken of 1,707,140 residential properties across 254 postcodes over the calendar year 2014.

Data indicates 82,724, or 4.8 per cent of Melbourne’s total housing stock appeared to be vacant over this period, having consumed <50LpD. No water was consumed in 24,872 dwellings – therefore being demonstrably unoccupied.

If just those residential properties consuming 0LpD were placed onto the market for rent, this would increase Melbourne’s actual vacancy rate to 8.3 per cent.[2] If 82,724 properties using under 50LpD were advertised for rent, the vacancy rate could rise to an alarming 18.9%.

Further examination of 130,610 non-residential properties across 254 postcodes over the same period identifies 7,941 or 6.1 per cent of Melbourne’s commercial stock was also vacant over 2014, i.e. having consumed 0LpD.

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Government failure to address Australia’s housing affordability crisis is indefensible. Access to affordable shelter is a basic human right and underlies national prosperity.

Vacant properties impose a needless economic burden. Residents and businesses are forced to leapfrog vacancies to lesser sites at great cost, increasing commuting times and placing upward pressure on prices.

Latent supply is usually not visible without a significant downturn in economic activity. If withheld stock were put to use, it would reduce cost-of-living pressures for tens of thousands of low and middle-income families and businesses marginalised by the cost of land.

This report recommends fundamental reforms to reduce the propensity for volatile boom-bust land cycles fuelled by speculation and unsustainable levels of household debt.

Current property taxes discourage investment into new housing, inflate the cost of land, stagnate housing turnover and hinder putting property to its highest and best use.

The report advocates that profound inefficiencies could be significantly alleviated if current transaction taxes were phased out and replaced with a holding tax levied on the unimproved value of land, alongside enhanced infrastructure financing methods for new developments.

Policy makers have thus far ignored Melbourne’s speculative vacancies and their effect on property prices.

With some 4.8 per cent of Melbourne’s houses showing severe under-utilisation, there is no housing supply crisis. Rather, rising prices indicate significant distortions created by policies supporting rent-seeking behaviour.

Government and statistical bodies need to recognise this disparity and employ a more comprehensive data analysis of vacant housing stock.

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Footnotes:

[1] Residential per capita consumption in Melbourne averaged 160LpD in 2014.’Water Outlook for Melbourne’ December 2014– Melbourne Water. Please see Chapter 3 for the methodology.

[2] As a proportion of investor owned stock based on census and post census data as collated by SQM – see conclusion for further explanation – rounded up to 1dp from 8.25%.