Catherine Cashmore presents on the hidden vacancies speculators hold in lieu of capital gains. 6.9% across Melbourne and up to 31.6% in some inner urban areas. Unmeasured by standard definitions, these empty homes are damaging affordability with government turning a blind eye to the locked out generations.

2. !
Why is it important?
!
! Affordability crisis
! “Housing Shortage”
! Dilapidated houses
(over-flowing mailboxes, un-kept lawns. Rusted
industrial sites vacant shops, vandalism..)
! Land unemployment rate

3. How do you tell if a property is vacant?
!
! Published Vacancy Rates
(REIV, SQM Research)
! Census Data
! Neighbourhood Watch and Community-Planning
Groups
! Analysis of Electricity Use (Paris)
! Council Data (UK)

4. !
! Is there a way to measure the rate of, and number
of long-term vacant residential and commercial
properties in Melbourne?
!
! Follows on from Speculative Vacancy reports from
previous years.
!
! Now into the 7th year.

5. !
! Conservatively low water consumption is a proxy measure to
identify un-derutilised residential and commercial property
stock.
!
! Data is un-fragmented and nearly complete – metropolitan
households cannot change their water retailer as they enjoy a
monopoly status.
!
! For the 2nd year, data is sourced from all three retailers: City
West Water, South East Water & Yarra Valley Water.
!

6. !
! Data provided 1,475,771
residential properties in
393 suburbs.
!
! 94.4% of total residential
dwellings in the greater
metropolitan area.
!
! Also covers 126,529 commercial properties across 399 of
Melbourne’s suburbs.

7. !
! Conservative measure of 50 litres per day (LpD) per
property used. (Shower – 12-15 litres per minute. Single flush of
toilet – 12 litres.)
!
! Per capita consumption was 161LpD in 2012/13.
Average daily usage for a two-person household
320LpD. Average daily use for a sole person 157LpD
(2013.)
!
! Only 3% of households use less than 50LpD.

8. !
! Vacant properties with leaks
◦ Slowly dripping tap: 20-50LpD
◦ Fast dripping tap: 230LpD
◦ Full flow (tap on full): 28,800LpD
!
! Apartment/unit blocks serviced with single water
meter. (All newly constructed buildings are now
required to install individual water meters)

9. ! Untenanted investment properties for sale.
!
! Demolished properties waiting for approval/renovation.
!
! Long period between old and new tenants.
!
! Serviced apartments (same reason as above).
!
! Water Tanks

13. ! Escalating capital values outweigh net rental
income, providing an incentive for vacant properties
! The tax systems encourages investors to speculate
– state land tax is low, capital gains are taxed at a
discounted rate, and land price escalation is rapid.
! May be easier to let properties remain vacant
(Landlord Costs).
! Cost of Renovation/Diseased Estates etc.
! Foreign Ownership

16. • UNITS - More than 7 in 10 investors - inner city suburbs
(Kingsville, Docklands, Carlton, and North Melbourne)
!
• HOUSES – More than 3 in every 10 properties on the
western fringes of the state. (Point Cook, Tarneit and
Truganina at 41.9%, 40.9% and 39.8% respectively
!!!

17. !
! Typical investor budget = $450,000-$650,000.
! State Land Tax (SLT), with a zero rate levied below
an assessed value of $250,000.
! $450,000 = $675 per/yr SLT + $900 per/yr council
rates.
!
$1600 total – vs - $30,000 ‘capital gains’

20. Owners Selling their homes in the June quarter of
2014 after an average hold period of around 10 years
!•
Boorondara - $519,000
•Whitehorse - $380,000
•Melton - $95,250
•Wyndham - $91,000
!
Gains Over Sep Qtr 2014
!•
Balwyn = 16.3%
•Thornbury = 16.7%
•Mount Waverley = 12.5%
!

22. ! Fewer Australians owning their homes outright (41-31% 1996/2011)
! A rising percentage of long-term tenants renting for a period of 10
years or more (1/3 tenants “long term” 10yrs or more).
! A decrease in the number of low income buyers obtaining ownership,
particularly families with children (49% to 33% - 1982/2008).
! A drop in the number of affordable rental dwellings with a marked
increase in the number of households in rental stress. (Over 60% of
lower-income rental households in Aus in rental stress)
! Greater requirements for public housing. (28% increased demand
projected by 2023).
! A rise in homeless percentages and those who drift in and out of
secure rental accommodation – with ongoing intergenerational effects.
(1996-2011 8% = 89,728 to 105,237)

23. ! There were 14,659 residential properties with no water usage
throughout 2013 (1%), while 64,386 (4.4%) used no more than
50LpD.
! Melbourne’s official vacancy rate is 2.5 per cent (SQM Research) If
combined with number of SVs it more than doubles to 6.9 per
cent.
! 105,520 transacted residential over the course of 2013 and 92,709
in 2012.
! Only marginally more than the total number of potential residential
and commercial SVs at 93,743.
!
A figure almost equal to year’s supply of housing turnover lays
dormant during a housing supply crisis.

24. !
! Dataset and methodology not publicly available.
!
! Analysis done in-house, no oversight.
!
! Not audited by independent third party.
!
! REIV ultimately represents agents, not vendors,
buyers or public in general.

25. Commercial/Industrial Vacancies
! There were 6,207 commercial (non-residential) properties with
no water usage throughout 2013 (4.9%), while 29,357 (23.2%) used
no more than 50LpD.
!
! In addition to speculation, large retail chains land-bank to prevent
competitors increasing market share.
!
! Unused commercial sites also stem from demolition, renovation,
industrial zoning constraints, and weak tenant demand.

26. !
! The State government has gifted landowners with reduced land tax
liabilities – the marginal tax rate is only 2.25% for properties valued
at $3million+.
!
! This encourages land and dwellings to be withheld, raising the SV
rate.
!
! There is a direct link between the housing affordability crisis for
renters/homebuyers and tax expenditures, concessions and
exemptions.

27. !
! #1: An improved State Land Tax (SLT) is levied on a low flat-rate,
no-threshold basis, replacing the current progressive land
tax schedule.
!
! #2: Transfer taxes such as conveyancing stamp duties are
replaced with a comprehensive SLT.
!
! #3: New estate infrastructure is financed by a bond system –
costs are recouped from residents over an extended period,
not folded into up-front housing prices.

28. !
! #1: Governments must perform extensive analysis of the
property market to determine reasons for vacancy.
!
! #2 Enhanced SLT - a low flat-rate no threshold SLT should
replace the progressive land tax scale
! #3: ABS takes lead in analysis and reporting of rental
vacancy rates (and all property data), not REIV/A or RE firms.

29. !
! Many properties potentially and demonstrably vacant
that could be placed on the rental market.
!
! High vacancy rate for commercial property.
!
! Property underutilisation or vacancy akin to labour
unemployment, generates inefficiencies.
!
! No apparent shortage of houses.