2024 Speculative Vacancies report release shows 5.2% of Melbourne’s homes lie vacant.
Prosper Australia’s 11th Speculative Vacancy report, examining water meter data, today revealed startling statistics on the extent of unoccupied housing in Melbourne that illustrate how speculative incentives are holding back housing from the market.
“Vacant homes and land banking are examples of how housing supply is held hostage by speculation, showing us the need for more effective land taxes” said Prosper Australia Director of Research and Policy Dr Tim Helm.
“We found that over 27,000 homes, or 1.5% of all dwellings, were left entirely empty for the entire year of 2023. With the inclusion of under-used homes recording less than a quarter of the average single-person consumption over the year, a total of almost 100,000 homes, or one in 20 dwellings across the city, were vacant.”
“That’s equivalent to two and a half years of new construction, which is enough to house everyone on the Victorian public housing waitlist twice over.”
“It is a shocking waste that so many homes are left empty during a rental crisis, and it speaks to the state of inequality that these numbers keep rising.”
“But we also need to recognise that it’s a predictable result of a tax system that prioritises speculative asset incomes over rental yield. Under-taxing capital gains and over-taxing productive activity enables this. It’s not surprising that so many investors prefer the flexibility of an empty property.”
Prosper’s study looked into unoccupied housing in Melbourne from 2019 to 2023, and found that long-term vacancy rates jumped more than 50% through to 2021, remaining elevated even in 2022.
“Our research shows that for every five homes built between 2019 and 2021, two more homes were added to the vacant stock and left unoccupied for a year or more.”
The fastest growth in vacancy was in the City of Melbourne, where 10,000 homes are now empty or under-used, the equivalent of half the new builds in this area over the last five years.
“It’s a mistake to treat empty homes as a minor issue for housing affordability. Bringing just a fraction of Melbourne’s vacant dwelling stock into use would improve access to housing.”
Prosper also drew a link between vacant homes and ‘land banking’, where developers delay feasible projects and set prices to slow sales in expectation of higher future returns.
“Empty homes are important to address, but to boost housing supply we must also tackle land banking, which is too often ignored or downplayed. Both stem from the same incentives and tax system distortions”
Prosper welcomed the Victorian Government’s moves to expand the Vacant Residential Land Tax (VRLT) state-wide and apply it to undeveloped residential land, as well as cracking down on tax non-compliance.
“Victoria is on the policy frontier, and other states should be watching closely. But we also need the government to commit to stronger ongoing monitoring, public vacancy statistics, and rigorous evaluation of whether the revamped vacancy tax is delivering as promised.”
“The vacancy tax changes are an improvement. But if we want a more durable solution to speculation we have to take seriously the idea of shifting taxation onto land using broad-based land taxes and value uplift capture.”
Report highlights:
- 27,408 dwellings remain completely empty: utilising water meter data, Prosper Australia’s latest count of empty homes reveals that 27,408 dwellings in metropolitan Melbourne (1.5% of all dwellings) were completely unoccupied in 2023.
- Underused housing has increased significantly: with the inclusion of dwellings that recorded less than one-quarter of the average single-person household consumption over the calendar year, almost 100,000 dwellings or 5.2% of all homes in metropolitan Melbourne were found to be either empty or barely used in 2023, up from fewer than 70,000 in 2019.
- Squandered potential: the volume of vacant housing in Melbourne now surpasses two and a half years’ worth of new dwelling construction, and could house everyone on the Victorian public housing waitlist twice over.
- Tax reform can unlock housing supply: the report highlights vacant housing and land banking as major, often overlooked barriers to housing supply, and argues for tax reform to undermine the incentive to speculate on rising housing and land values.
