Vacancies in Melbourne Report

Andrew Sadauskas

EXECUTIVE SUMMARY

– Broad Scope: Our research evaluated 652,695 properties across 23 different municipalities in the western, inner, southern, and south eastern suburbs of Melbourne. This represents nearly half of Melbourne’s 1,471,155 private dwellings.

– Genuine Vacancy Rate: The Genuine Vacancy Rate includes all vacant properties, including those not on the rental property market (i.e. speculative vacancies) in both residential and non-residential markets.

– 1 in every 15 Melbourne properties vacant: We found Melbourne’s Genuine Vacancy Rate currently stands at 6.86%. Many of these vacant properties are being withheld from the rental market in the form of speculative vacancies. This hoarding pushes rental prices up.

– Housing Bubble: The focus should shift from a housing shortage in Melbourne and towards the cause of housing bubbles. The rental crisis relates to a shortage of landlords willing to lease their properties. Encouraging speculative vacancies to become occupied properties would result in more affordable housing and place a downward pressure on rents.

– Federal and State Public Policy Failure: Government policy is based on the assumption that housing is being used efficiently and that there is a shortage of housing despite access to information that indicates the high proportion of genuine vacancies. This false assumption informs costly policies including the First Home Owners Grant (at the Federal level) and the Urban Growth Boundary Expansion (at the State level).

– Instant Housing supply: 14,149 houses could be made available for housing within days if more effective economic policy was adopted.

– 44,753 vacant properties were found across Melbourne’s inner, western, and south eastern suburbs: In comparison, this is similar in number to the City of Maribyrnong (covering Footscray, Maidstone, Maribyrnong, and Yarraville) which has 30,484 households in total.

– One in five commercial properties are vacant in Melbourne’s south east: In Melbourne’s south east nearly one in five commercial properties are vacant; a Genuine Vacancy Rate of 17.22%. This means that the Genuine Vacancy Rate for commercial properties is above the 15% office vacancy rate found in Boston.

– Rust-belt suburbs: We found significant vacancies in Moorabbin (9.85% vacancy rate with 44.5% of properties zoned non-residential), Dandenong South (10.33% vacancy rate; 91.19% of properties zoned non residential) and Bayswater (4.52% vacancy rate with 25.1% of properties zoned non-residential).

– Alarming inner city vacancy rates: Many inner city suburbs have high Genuine Vacancy Rates, including Collingwood (which has a 7.44% Genuine Vacancy Rate), Southbank (6.89%), and Princes Hill (8.76%). The most astounding results, however, came from the 11.05% vacancy rate in Carlton, the 16.56% Genuine Vacancy Rate in West Melbourne, and the 28.96% Genuine Vacancy Rate in Carlton South.

– Capital Gains trump rental income: The highest Genuine Vacancies are found in areas where high capital gains are expected due to new infrastructure projects (Dandenong South re Eastlink) and/ or the inherent demand found in cultural hotspots (Carlton South).

– Clear need for Tax Reform: Local Governments must switch from Capital Improved Value (CIV) rating systems to a Site Value (SV) rating system. This would re-balance the playing field between the family home and the speculative investor. Federal and State Governments must switch from ‘transaction taxes’ on land (e.g. Stamp Duty and Capital Gains Tax on property) to a Land Tax to discourage speculation.

– Turnoff speculative demand: Such tax reform would channel landlords towards focusing on rental income rather than capital gains.This would signal a preference for more building, more density.

– Conservative Methodology: We did not examine the possibilities for subdividing existing properties in this report.

Read the Press Release
Read More