“With 46,220 properties vacant in Melbourne, the myth we have a housing shortage cannot go on much longer,” Earthsharing Australia spokesperson Karl Fitzgerald said today.

Earthsharing’s Speculative Vacancies report highlights that tightness in rental stock does not equate to a lack of housing. The much quoted REIV’s 1.7% vacancy rate (Nov 2010) only refers to dwellings for rent, a subgroup of Melbourne’s total housing stock.

“Victoria’s Minister for Planning Matthew Guy is relying on poor data in contemplating to sprawl Melbourne even further when 46,000 homes lie dormant.

“Capital gains for Melbourne properties averaged $120,000 in boom years like 2009. Why would all investors bother to rent out a property for $17,000 when they could hold some of their portfolio empty to enhance massive capital gains?” asked Fitzgerald.

“When iconic suburbs like Carlton South have Estimated Genuine Vacancy rates of 11.5 per cent, Melbourne East 18.5 per cent and Docklands a staggering 23.32 per cent, there is something wrong with the economic incentives society feeds off” Fitzgerald said.

The report analysed 64 per cent of Melbourne’s residential stock using water meter data supplied by City West Water and Yarra Valley Water. Dwellings using under 50 litres a day for 6 consecutive months were deemed vacant.

“Extrapolating this to all Melbourne real estate, there are over 61,000 empty homes and apartments lying empty.

“The Speculative Vacancy report is an urgent warning to potential buyers. This is not the time to make a life-long commitment to buy a home – the market is flooded with stock as investors bail out of the market. With supply overwhelming demand, prices must fall.

“First home buyers are being told it is a ‘buyer’s market’. “Transitioning from one of the world’s biggest property bubbles into a genuine buyers market is a process that takes years, not days.

“SQM Research’s figures on the volumes of Melbourne houses offered for sale shows a staggering increase. March volumes are up an enormous 48 per cent compared to last year; April is up by an even larger 68 per cent over 2010.

“Buyers are being deliberately misled by incomplete statistics further transformed by real estate ‘spin’. We urge the federal government to instruct the ABS to collect and publish a monthly statistical series on housing vacancy rates in the interest of a fully informed market”

“Experienced players in the land game know the bubble has peaked and have already sold out.” Fitzgerald concluded.

Read the report

Home Buyers Strike Called

The Dont Buy Now Home Buyers Strike was launched Tuesday to warn prospective property buyers that now is the worst time to buy a house.

The state of the housing market is unfurling at a rate of knots. A mexican standoff is being played out between sellers trying to maintain prices and buyers being hounded to jump into the market. Abnormally high auction listings raise questions about our supposed housing supply shortage.

Usually Melbourne averages around 700 properties for auction per weekend. The next 3 weeks will see 900 properties listed per weekend, on top of the 1000 plus type listings in December (of all months!).

Check unexpected jump in mortgage arrears, the suburban divide and here comes the crash.

Tuesday’s ABS housing lending figures were also of note.

RP-Data tweeted Mar 15 “Capital gains recorded in all capital cities in past 12 months, except Sydney, have been below avg annual growth in values over last decade.”

The spruikers are exiting the market and will be doing all they can to cover their trails.

With this in mind we have triggered a Home Buyers Strike awareness raising campaign.

GetUp supporter Bullion Baron has picked up on Prosper Australia’s press release Prosper Calls for Buyers Strike and listed it on the GetUp campaign ideas forum. (FYI Prosper is Earthsharing’s parent body). Here is the latest press release @Prosper : Buyers Strike Day 3.

At present we are racing up the GetUp charts from 111th Tuesday night to 19th a few minutes ago. A campaign on GetUp could be just the kickstart we need to bring people into the bigger issue of re-balancing the tax game away from speculative largess and towards housing as a human right.

We need 300 more people to vote a ’3′ (just 900 votes) to be the number one GetUp campaign idea.

Vote for our Buyers Strike on GetUp – it takes barely 20 seconds.

Forward on the link: http://tinyurl.com/buyerstrike

Join the facebook group

- the most recent comment there was “At last…the voice of the people instead of the spruikers!”

Remember:
In Jan 2011 the average first home buyers loan was a staggering $266,700. In April 2000 (just as John Howard’s halving of Capital Gains Tax was kicking in) the average size of a loan was $134,000. The halving of CGT for a select few has in effect doubled the costs for the rest of us.

Now’s the time to act. Warn your friends!

As you may have read in the original report, we uncovered a genuine vacancy rate five times that reported by Real Estate Institute of Victoria; 6.9% compared to REIV’s 1.4%.

By collating data from Melbourne water suppliers we were able to assess the number of Melbourne properties that are genuinely vacant, as opposed to the number of properties on the rental market. The results were alarming.

The report indicates that just one in five vacant properties are being advertised as such, the rest are being withheld from the market in the form of speculative vacancies. This is very disturbing when you think that government policy is being based on figures that are so dramatically understated.

How can they possibly expect to effectively combat a shortage of affordable housing when they’re not even acknowledging the real amount of housing available?

Other key findings of the report, which identifies suburbs and municipalities hardest hit by speculative land hoarding, include a 29% vacancy rate in Carlton South and a 17.3% industrial and commercial vacancy rate in Melbourne’s South Eastern Suburbs.

The accompanying graphs are shocking for a city supposedly beset by land shortages. Download the report here.

There is a clear need for land tax reform – this would discourage land hoarding by encouraging landlords to focus on rental income rather than capital gains.

If housing is a human right then our tax policies must genuinely reflect this.

The Rudd- Swan government’s flat denial of negative gearing reform proves that modern politics is incapable of dealing with the difficult questions. It was all too risky in an election year.

The dreams of working families are set to play second fiddle to the propertied class for years to come. But yet the announced reforms are the most significant tax reforms in living memory Mr Swan? Who are you playing us for?

Even more so today as interest rates are again raised. Hurrah – those who already own property don’t even have to ask for a subsidy from their subjects – the government is cheering the way via negative gearing write-offs.

The higher the interest rate, the greater the write-off.

Today’s write-offs equate to a $29.44m gift to the owners of the Great Australian Dream (1.6m negative gearing property owners with an average $300K mortgage over 30 years x 0.25/ 40%).

Working class people will have to pay the wealthiest via their taxes to cover this $30m trickle up.

All this and more is obvious to foreign economic experts. Our government and selected media insiders are the only ones that can’t acknowledge our bubble mania.

Our land and housing prices are more than 70% over their long term average, according to one visiting expert, Edward Chancellor, but yet the Rudd government has failed to even consider reforming the two most obvious tax distortions, negative gearing or the 50% capital gains tax deduction.

Post bubble, will renters thank negative gearing for keeping housing so high that they can’t enter the market?

Will they be happy when their superannuation investments are wiped out 2 – 3 times before retirement because of the dominance of lobbyocracy lording over long term thinking? Asset Bubbles in a financialised economy are ever so risky.

And Swan tempts young people to scream by saying that he is proud of the $700m first annual federal permanent infrastructure fund. Remember the statement:

“Your Taxes Fund the Infrastructure That Makes My Land More Valuable.”

“Cheers”

The Henry Review has opened up the field of discussion on land taxes – hurrah! However, we must take them to task over this statement:

Though the Review’s proposed reforms to taxes, in particular stamp duty and land tax, could play significant roles in addressing housing affordability, other policies are likely to have a more pronounced impact on the responsiveness of housing supply.

This has been jumped upon by the property lobby as another clarion call for further urban sprawl forever policies. What about the property lobby’s willingness to openly declare they will crimp supply to bump up profits? See Mirvac here and Stockland there.

Forget the fact that the National Housing Supply Council wimped out on stating that there are 622,781 speculative vacancies in Australia. Read our calculations plus other immediate supply resolutions in One Handed Housing Supply.

Christopher Joye even critiques the ABS/ government for there being no solid land valuation statistics. For years we have been wanting a central body to release the State data uniformly; S.A’s land price data is released the month after collection, whilst Victoria’s takes 18 sleepy months.

However, back to the land supply versus zoning issue. No government body has openly recognised the role of speculative vacancies. This must become a central COAG issue.

Few are talking about the need to build upwards, not outwards. Rob Adams talks about 500,000 people being able to be housed along our transport routes. Nothing was done about that by the Vic State Govt, but you can bet your bottom dollar the astute investor would have bought up along tram routes in cultural hot spots (see Sydney Rd).

The government must look at these factors to have a rounded view of the housing market.

Yesterday’s announcement’s that property prices have increased by 20% in the last year must make minimum wage earners wince. Workers received no wage increase last year, following a 4.1% increase (Oct 08) and a 7.7% increase in Dec 06.

‘Working families’ KRudd? The joke is on wage slaves when capital gains holds the reins.

Who lays the ALP’s golden eggs?

photo credit: Ian Sane

On the one hand, the market delivers the best for the least cost.
But on the other hand…. few are willing to call it as it is.

Yesterday’s National Housing Supply Report used coded language to hint at a ‘possible over-supply of housing’ due to housing investor tax breaks (p50).

However the usual suspects were missing from analysis when commenting on the role of vacancies:

Specific purposes include vacant stock awaiting sale, demolition or replacement, and holiday homes.

“Awaiting sale”. How very polite! People are screaming for housing and this is the best the nations peak body on housing supply can come up with?

Census data was used to show 830,374 properties as ‘awaiting sale’ or as holiday homes.

The said analysis focused on ABS statistics, which don’t include vacant land. This figure could easily be doubled if the nation’s residentially zoned land banks were included.

To bring the rental vacancy rate back to 3% – the rental market equilibrium, it is stated on p87 that:

The Council estimates that an additional 26,000 vacant private rental dwellings, mainly in New South Wales and Victoria, would be required in 2008.

We identified 14,149 here in Melbourne in a survey covering just 44% of Melbourne’s housing stock.

The ubiquitous Productivity Commission was quoted regarding the changing of the capital gains tax:

… has added to the recent housing price boom by encouraging investors to reduce current income in favour of longer term capital gains.

Only 830,000 vacant properties….but yet there is a possible shortfall of 200,000 dwellings by 2026???

And over at Rupert Murdoch’s Australian, Housing Shortfall Locking Out Thousands, the usual lines are run:

In a carefully worded criticism of the tax system, the report said the rules were skewed towards home buyers and mum and dad landlords at the expense of investors to build more medium-density housing for the future.

Medium density is mentioned twice in the report but from what i can see never is there a carefully worded mention along these lines.

Lower yields are of course mentioned. Is that why housing supply is dropping? What is the other hand saying? Shhhh…..

That’s what happens when you have a land boom. The pursuit of capital gains ensures that rental yields drop (slowly increasing rental income compared to Melbourne’s Dec 09 $70,000 jump in land prices).

In the final pages (p176), the report states:

In 2008, Port Hedland had a capital growth rate for property as at March 2008 of over 37 per cent according to Residex statistics.

Rising incomes and the Law of Rent demands that landlord’s can demand higher rents, as miners have the capacity to pay. It’s either that or go live in a shipping container house in 45 degree temperatures.

The Age’s Jason Dowling states:

The report also noted a large proportion of Australian homes were empty. It found one in 10 homes were unoccupied and that a quarter of these were holiday homes.

If one quarter of all vacancies are holiday homes (a mysterious stat we have been yearning for), this implies that 7.5% of Australia’s stock are speculative vacancies.

The pursuit of justice demands that we calculate the supply of speculative vacancies. Why didn’t the National Housing Supply Council? What was this ‘committee’ set up to do? (Fair enough they do say they will next time…when the bubble has popped)

That total is 622,781 properties.

622,781 speculative vacancies are holding the market to ransom, demanding their capital gain.

To emphasise, that is 3 times the supposed under-supply predicted in the far future of 2026.

To re-re-emphasise, these speculative vacancies could add 350% more to supply than was needed in 2008.

Until housing is seen as a human right rather than a speculative kite, the housing supply analysis will always have one hand behind its back.

Will Ken Henry have the ticker to recommend that higher and flatter land taxes replace payroll, halve income taxes and fund the abolition of the regressive GST? That is what is needed to restore the Great Aussie Dream.

photo credit: waferboard

Land in Short Supply in Perth

The Urban Development Institute says there are currently fewer than 1400 blocks of land for sale in Perth.
..
But, the Real Estate Institute believes there are a lot of speculators sitting on land waiting for prices to improve before releasing them for sale.

The UDIA is concerned that with 1200 migrants visiting Perth each week, the 1400 blocks of land for sale is insufficient to address affordability.

With only 7 auctions last weekend and 20 on Feb 21, for example, it seems that the property downturn in Perth is still in effect. How many other blocks are being withheld and aren’t up for ransom at present?

With higher populations, the demand for land will rise. The REI rightly states that many speculators are sitting on idle blocks waiting for money to grow on trees.

Higher populations should encourage development upwards, not outward. Prime locations become more valuable, ensuring that owners have to make their land more productive to warrant the investment.

The issue is that with more and more builders turning to land banking as a means to an ends – free skiing in Aspen funded by you the taxpayer, you the worker – there is less motivation to build upwards.

This trend will hit the Rudd Government this election year. The rush to remove democratic rights of appeal for local communities in a bid to counter the private sector’s preference for land banking, may well cost some Victorian ALP members their seats.

When will government’s of all persuasions look lobbyists in the eyes and tell them to disappear? Land banking is not only forcing our mortgage costs through the roof, but it is robbing communities of our best and brightest people. How many GP’s have given up their practice for such speculative activity?

Media Release

Housing Shortage in Inner City a Myth

2,317 properties have been found empty in central Melbourne during Australia’s worst ever housing crisis.

Read the Full Report (PDF 432kb)

“The 2008 I Want to Live Here report has found a 7% genuine vacancy rate in the inner city as compared to the much publicised 0.9% vacancy rate. The reported rate is a shocking one tenth of the genuine vacancy rate that speculators withhold from the market” said report author Tohm Curtis.

“At least $1 billion in vacant property exists in the inner city, and over $10 billion in Greater Melbourne.”

“The suburb of Carlton alone has sufficient vacancies to house all 220 reported homeless students at Melbourne Uni” said Mr Curtis.

“Last week the Housing Industry Association tried to claim that land supply is the cause of rising housing prices. Yet the 90,000 blocks opened up by Brumby earlier this year, on top of the 38,000 existing empty blocks of land held by Australia’s 6 biggest developers, have done nothing to curb rising land prices. Obviously there is another factor at play and our report demonstrates that it is speculation.” stated Project Coordinator Karl Fitzgerald.

“Brumby’s 2030 expansion is nothing more than a handout to property speculators. What he should focus on is tax reform to ensure that existing housing is used for living rather than the ‘laughing all the way to the bank mentality’ that land speculation enables.”

“Council budgets are stressed by further infrastructure expansions when existing residentially zoned land should be further utilised.”

“The least we should be doing to tackle climate change is to ensure that people are living as close to their places of employment as possible. It makes no sense for packed suburban trains and busy roads to be driving past vacant property after vacant property when there is space for people to live close enough to walk and cycle to work and school.” said Mr Fitzgerald.

“These speculative vacancies are unacknowledged by economists and politicians despite being reported in the Census as recently as 2006. Government should rely on its own reliable sources of information instead of using figures provided by the real estate industry. The REIV and Australian Property Monitors regularly report vacancies of 0.7-0.9%, based on those properties up for rent.” claimed Mr Curtis.

“These speculative vacancies exist because government policy reinforces this speculative behaviour. Policy at all levels of government have been designed to keep the housing bubble inflated” said Mr Curtis.

The I Want To Live Here report calls for genuine tax reform as the only means to ensure long term housing affordability and ensure future Boom Bust cycles are avoided. Higher and flatter holding taxes on land should be implemented to balance out the advantage that property speculation has over all other forms of business.

Key Findings:

* 2,317 vacant properties in inner Melbourne.
* 18,070 vacant properties in CityWest Water’s client base of Greater Melbourne.
* $1,044,967,000 worth of vacant property in the inner city.
* If 44 of the 2,317 vacant properties were leased or sold per week it would take over a year to clear the backlog.
* If this extra supply of housing was to hit the market the price of housing would become more affordable.
* Government policies of all levels are critiqued and fall short on many levels.

Read the Full Report (PDF 432kb)

Appendix 1 – CWW vacancy findings

Read the 2007 report

For questions or comments please contact:
Tohm Curtis, Researcher, Report Author, 0416 313 273, tohm@earthsharing.org.au
Karl Fitzgerald, Project Coordinator, (03) 9670 2754, k2@earthsharing.org.au

photo credit: jorel314

Ben Schneiders hit out at the IPA/ Costello push for land supply forever in this cunning article:

IT WAS one of the most pernicious of the myths peddled during the 2007 federal election campaign – that state Labor governments were largely to blame for the record low levels of housing affordability and all they needed to do to ease the problem was to release more land.

He goes further:

Data compiled by The Age in 2007 showed that, rather than there being a shortage of land, big developers were swimming in it and the top six listed players were aggressively acquiring it. Their land banks – the number of lots on their books – had risen nearly 20% in a year. Some of the biggest players, such as Stockland, had more than tripled in the previous five years.

Of course, the Costello/IPA “argument” to release more land, would be great for developers, which could stake a claim on great swathes of Melbourne’s paddocks and the outskirts of Australia’s other big cities.

Recent moves in WA and China to cut property taxes will see this trend increase. This will enable fat cat landlords to be even lazier. With clearance rates plummeting last weekend from 50% in Melbourne (when we were averaging in the 80′s this time last year) to a gob smacking 27% in Adelaide, a rising tide of property is backing up.

This can only be good news for first home buyers. Hold off! Over the next 3 – 4 months we will see a severe drop in house prices as people realise the price they paid is not reflective of the earning capacity of the average aussie. The market will be flooded with houses as speculators try to bail out before the market well and truly tanks. Our own credit crisis will set in similar to what America has gone through.

However, policymakers worldwide are doing their best to bail out baby boomers and force those generations who will have to clean up the climate mess with a lifetime of record rents. Rudd implies that we should be paying 50% of our income on rent with his policy decisions so far. Outrageous.

The cutting of holding charges on land will only prolong the pain. Housing prices should be encouraged to fall as quickly as possible so that small business can find cheap rental property to start-up.

photo credit: _temaki_

Buyers look for existing houses as land prices soar rolls out all the old chestnuts:

Economic forecaster BIS Shrapnel says the demand for newly built houses is dropping off as the cost of land soars.

It says the limited supply of new land has led to the growth in land prices outstripping the growth in house prices in recent years.

Anyone on a bike commuting to work each day will soon tell you there are multitudes of vacant blocks of land lying idle. Regardless of the 119.623 vacant homes on census night, there are easily as many vacant blocks of land held by speculators in Melbourne.

Yes that’s right, the privately controlled supply of land is what is forcing up the price of land. Urban sprawl forever is not the answer.

Rudd’s Commonwealth land supply is nothing more than a handout for land bankers – unless Rudd backs it up with a holding charge on land. See evidence of land bankers in action on a former commonwealth RAAF site in Melbourne’s poorest community, Braybrook.

No wonder people are paying more as a percentage of wages than ever before. But yet powerful interests are able to manipulate the media into doublespeak. This land banking trend is what has driven the US economy to such meltdown mayhem. We will be next.

Read more about the importance of releasing this privately monopolised supply of land in the I Want to Live Here report.

Last night’s Insight focused on the tragedy unfolding in the housing market and it’s effects on the rest of the economy. It was good to see that Housing Supply side issues got some time on air, but again the property lobby had large numbers in the crowd, no NGO’s got a guernsey, the omnipresent Ross Gittins took the softly softly line and outside of Steve Keen, there was not the sort of hard hitting critique needed.

The Real Estate lobby again pushed for more land supply. Result – cheap land for speculators to extort the market. Someone mentioned building high speed rail to Penrith and surrounding areas. Result – the added benefits are capitalised into higher land prices – benefiting whom? Those speculators with inside contacts. Debt was mentioned at 7 times the average wage – yes, but why? The high cost of land due to land speculation, inefficient government developer charges and the failure to capture the economic rent. Supply side was mentioned by 1 young academic and a few others, but no one dared to mention how.

Supply side? 119,623 vacant homes in Melbourne. Supply would be increased if the most efficient tax of all is implemented, the one students are taught in economics as the most effective way for government to raise revenue with the least distortions. It’s called Land Tax.

Let’s rename it as a Site Rental. No one likes a tax. We don’t like how it is presently administered, but we agree with the property lobby that it should be set at a flat rate. However, we differ in seeing that it should be set at a higher rate, funding the abolition of income and sales taxes.

Holding charges on land are barely 2%, whilst land values have increased at over 10% p.a for over a decade. The two are inter-related. Increase holding charges and speculation is diminished. Land banking becomes no longer profitable. Read more here and on our sister website

But what did other bloggers say?

Surfing through the SBS Insight comments page it was good to see the number of bloggers concerned about housing.

Check: Australian First Home Owner

HOUSING UNAFFORDABILITY and RENT STRESS are no accident. Both are the result of deliberate design of tax rulings that gives massive purchasing and debt repayment advantage to residential investors.

Affordable Homes for All Australians

I have nothing against someone wanting to make a quid. But the reality is that price increases, driven by huge investor demand, have been at the cost of the younger generation’s aspirations of owning a home in which to raise their families.

Contrarian Investors Journal summed up the Myth of Australia’s Housing shortage

When it comes to solving Australia’s housing problem, there is an entrenched superstition that makes many believe that there is a housing ’shortage’ in Australia.

And the crew over at Global House Price Crash held up the torch for our buddy Steve Keen.

It was good to see that Gavin Putland’s critique of Negative Gearing got a mention in the comments.

Read Bailing out the Bubble’s Enabler’s by Dr Michael Hudson, Prof of Economics (and Chief Economic Policy Adviser for the recent Kucinich for President campaign) if you want to get serious about this topic. He will be interviewed today on the Renegade Economists. Join the podcast!