Melbourne’s hidden ghost city revealed

By Leith van Onselen

Prosper Australia has released its 2018 Speculative Vacancies Report, which estimates up to 16% of investor-owned residential properties in Melbourne are vacant, based on water usage data. The Chinese mecca Box Hill in Melbourne’s East is estimated to have the highest percentage of vacant investment properties. Prosper Australia recommends Victoria implement a broad-based land values tax (as a replacement to stamp duty) in order to penalise hoarding and reduce the number of vacant investment properties in Melbourne:

Water data indicates 60,901 residential properties were vacant in 2017. This equated to a speculative vacancy rate of 3.9% for all residential property. Absolute vacancies using zero litres of water revealed 21,326 residential properties at 1.3%.

The absolute vacancy finding of 21,326 using zero litres per day (LpD) demonstrates that more than $20 billion in vacant property existed at the height of Melbourne’s property boom.

As a percentage of investor-owned rental properties, a deeper vacancy analysis would see an increase from the advertised 3.3% vacancy rate to 7.8% (for 0LpD properties). If this was extended to include those properties using less than 50LpD, the vacancy rate could reach a disturbing 16.2% of all rental properties.

An unemployed labour rate of 7.8% would make headlines. So should it for the underutilisation of land during extended periods of unaffordability.

Abnormally low water consumption is used as a proxy for vacant land, housing and commercial premises. Fifty litres per day (LpD) has been identified as our threshold for a speculative vacancy (SV). In 2017 residents used on average 161 LpD per person.

Data is analysed from Yarra Valley Water (YVW), South-East Water (SEW) and City West Water (CWW). The 2017 data is averaged over 12 months of consumption on a postcode by postcode basis.

Over our decade of analysis, we have seen improvements in vacancy measures. We welcome the evolution of the headline vacancy metric from a voluntary survey submitted by real estate agents (the REIV vacancy measure) to data scraped from online real estate ads promoted for longer than three weeks (the SQM vacancy measure).

However, both measures still exclude a key segment of the property market. Neither metric captures properties that are held vacant off-market.

A truly useful vacancy measure must include these vacancies. Without off-market properties, ‘vacancy’ statistics can provide only surface level analysis.

If supply side issues are held to be the core issue in housing affordability, effective use should be a measurement criterion. It therefore follows that all land usage must be measured in terms of its effective use. A more thorough and meaningful measure must be recorded by an objective government body…

The Victorian government recognised this issue by announcing a vacant residential property tax in March 2017. The report recommends further policy reforms to reduce the hoarding of vacant property. Land Value Tax is the most appropriate policy as it acts as a holding tax penalising poor land use.

Prosper Australia contends that current property tax settings are too low, inaccurately targeted, and encourage lightly taxed windfall gains. This has encouraged record high housing prices and undermines the state’s financial stability.

Top 20 Suburbs for Speculative Vacancies:

 

Comments

  1. Yeh. More taxes. That is the easiest call in the world. Fix problems with more taxes. in this case more Land Tax while ignoring the plight of the millions of other Australians who will have to pay it too…not just the vacant property owning Chinese. Leith van Onselen neglects to declare his attachment/interest in Prosper Australia. If this was a non declaration by Morrison, Shorten or any other politician or business person Onselen would be at their throats. Onselen wants a Land Tax and blocks people who oppose it from commenting on this site, doers not publish substantiated anti-Land Tax evidence or news stories, and while he surreptitiously promotes Land Tax through agencies such as Prosper Australia.

    • Gov will bring in a land tax when stamp duty dries up and they run out of money, gov couldn’t care less about vacant homes or if people can’t find a place to live
      Politicians only care about being voted back in
      You’ll be getting a land tax one day unfortunately because they’ll switch when they run out of money
      The great Australian nightmare of owning a home

      • Land tax is needed to fund the roads because hybrid cars are going to kill the petrol tax. A shop here has written “cash only” on the wall. So the GST law is being violated.

        They could grandfather the stamp duty – so any house that is purchased by after 1 July 2019 has no stamp duty on it but has land tax instead. Foreigners should have to pay a higher rate of land tax.

        New York state has a mansion tax that raises U$400 million per year. Manhattan may get a congestion charge soon – and the poorest 10% of the plebs may be exempt from the congestion charge.

      • Jacob – the grandfathering could be done in a more sophisticated way, i.e. you get an exemption for a certain number of years depending on when you bought. I think ACT is currently trialing a scheme of this nature.

      • @ Jacob

        Land tax is needed to fund the roads because hybrid cars are going to kill the petrol tax

        what a nonsense

        – how about taxing hybrid and electric cars to fund roads ?

      • When, if ever, did you see Onselen write about anyone, or the facts, opposing Land Tax. How many pro-Land Tax stories has he written (possibly more than 1,000).

        You will also find that Gavin Putland, David Collyer and Cameron Murray, all of whom are one sided contributors to Onselen’s pro Land Tax bias, are members of this pro Land Tax group.

        I suggest you open your one-sided eyes and do your own research, fitzroy.

    • As a result of your post I went to the prosper Australia website and had a look at some of the resources there. Thank you very much for the referral.

      • Does that intensify your one eyed view, fitzroy, or will you also look at anti-Land Tax writers and evidence?

      • Still no evidence. “Intensely one eyed view” I have ventured.no opinion one way or the other. I am not a member of prosper and I am unaware if UE is. Perhaps this is a confluence of ideas. However you refer to an opposing view.. What writers do you suggest?

    • Tax is indeed a blunt instrument but perhaps if the Govt had done their job properly in the first place of vetting the massive influx of black money into the property market here then the vacancy rate would be far less of an issue. After all, which legitimate enterprise can really afford to have a six or seven figure sum parked in an asset that provides neither utility nor income?

      The Govt has deliberately allowed this black money in to prop up the bubble and keep developers and tradies in jobs and treasure.

    • At last a new NaturalTrust.

      Objections to land tax as a method of general taxation are legitimate and need debate.

      However, there can be little objection to a land tax that raises revenue to deliver services and infrastructure that support and increase the value of land.

      Confusing these two issues is a major part of the problem when the topic of land tax comes up.

      It might be better to call a land tax that is about delivery services to land as an infrastructure/services tax on land and there can be a local govt version and a regional/state government version.

      A general tax levied by reference to land is a different kettle of fish.

      Plenty of arguments for and against that.

      • It is still Land Tax even if you change the name, Pfh007.
        You have not seen NaturalTrust because Onselen’s one eye, most often, deletes NaturalTrust’s comments.

        You should protest against such bias and censorship!

      • eyeone1,

        The problem with NaturalTrust was that he ignored the point I just made….a bit like you just did.

        It is very hard for a land owner to argue against contributing to the cost of the infrastructure and services that give value to their land.

        Are you opposed to rates too?

        Are you demanding that you should be left to make your own arrangements with regard to water supply, waste removal, sewerage and road access?

        If so you need to make that clear. I would recommend an island off the coast as an excellent purchase. You should be able to persuade the government to steer clear and not spend a penny on providing you with any services or infrastructure.

        As to whether land should be a target for taxation for general revenue unconnected to the services and infrastructure required by land there is room for argument.

        Now is your chance to make the case.

        If you do a good job and in a civil way (i.e. keep to the arguments) I doubt your comments will be deleted.

      • Pfh007. I see you support censorship.

        “If you do a good job and in a civil way (i.e. keep to the arguments) I doubt your comments will be deleted.”

        And you resort to using ad hominem by stating that I am not responding in a civil way and not keeping to the arguments. (P.S. This is not an “argument” as you seek to label it).

        Having said that and seen you argue repeatedly against any information in the past I will go on with my more important work.

        I suggest you go back through the many responses that were made to you by NaturalTrust in the past and you will have your answers.

      • EyeOne1,

        “..,;And you resort to using ad hominem by stating that I am not responding in a civil way and not keeping to the arguments. (P.S. This is not an “argument” as you seek to label it)…”

        You do realise that everyone is able to review my comments and see that I did not accuse you of anything.

        The most that could be said is that I implied that people have their comments deleted because they do not respond in a civil way and keep to the arguments.

        I am not aware that any of your comments have been deleted so I clearly could not have been referring to you.

        Is this a roundabout confession that you are NaturalTrust and as NaturalTrust you had comments deleted? Though I have no idea whether NaturalTrust had comments deleted. Perhaps he had more important things to attend to and that explains his absence in recent months.

        And yes I do consider it uncivil to accuse me of an ad hominem attack when I did nothing of the sort.

        But do not delay any longer on this thread as you have your more important work to attend to.

        What is it? I am bursting with curiosity.

  2. Plot twist – my mate’s water bill says he uses less than 22 Litres per day!

    lol 🤣🤣🤣

    Straya. Where even the water meters are corrupt.

    In less corrupt Canada, the vacant property tax is putting mansions on the rental market:

    Hundreds of luxury Vancouver mansions being rented for cheap

    9 Mar 2019

    https://www.youtube.com/watch?v=JlSt8ByMJW8

    How do they know which mansions are empty?

    • Good link Jacob
      Can you imagine of that happened
      It’s outrageous gov allowed so many foreigners buy and leave vacant
      Cheats never prosper
      You eventually get caught

  3. DefinitelyNotTheHorribleScottMorrisonPM

    This is clearly because renters tend to be labour voters who don’t wash. Think about the basic science, people.

    • This. No one mentions it either.
      I can’t imagine what amount a land tax could bring in that wouldn’t totally fk a home owner but also discourage empty homes.

      • Why discourage empty homes? Traffic congestion is already bad as it is. Imagine how much worse it could get if all these homes were fully occupied.

  4. land tax would not prevent any of these things (as it didn’t in US where property tax is high and yet during bubble days millions of homes were kept empty)

    what replacing stamp duty with land tax will definitely do is make short term home flipping affordable – just imagine Australian flipping craze if the total cost of flipping reduces from $50k to $10k?

    replace stamp duty with land tax because what we need the most is more speculative home flipping

    • Agree,

      Its is doubtful that a land tax would deter speculators.

      Stamp duty does not appear to be very effective in that regard either.

      Much more effective in that department is proper taxation of capital gains and regulation of the creation of Banker’s Pseudo Fiat so that investment in housing is driven by returns from renting rather than debt driven asset price speculation.

      Get rid of stamp duty and replace it with an infrastructure/services levy on land that is simply about the services provided to land owners and then argue about the issue that concerns EyeOne1.

      • you are right, only proper capital gain taxation makes sure speculation is under control
        Germany has property/land tax, high stamp duty and speculative capital gain tax for sales prior to 10 years and some of the most affordable homes in the west

        none would be complaining about stamp duty or land tax in Australia if property prices were affordable (e.g. $300k for a median house in Sydney or Melbourne and $200k in Brisbane, Perth and Adelaide)
        Stamp duty would be just $9k and 0.5% property tax would be just $1.5k

      • drsmithyMEMBER

        Nobody would be flipping houses absent a bubble.

        But the arguments in favour of land tax and against stamp duty would be the same.

  5. kiwikarynMEMBER

    The reason these homes are vacant is because the owners are not allowed by law to live in them or rent them out. This is the quirk of the FIRB rules. Foreign buyers are allowed to buy existing houses for the “purposes of development” only. So they buy up all these big homes on big blocks of land, then leave them vacant while they pretend to be intending to develop them. They’re supposed to have four years in which to actually start the redevelopment, but the house is probably onsold before then to another foreign buyer who decides to do a different development so the clock starts over. If you don’t want so many vacant homes, then ban foreign buyers altogether, or change the FIRB rules.

  6. The issue with a land tax is that it means your home or property is never really yours — the Govt effectively has a lien on every property. It’s the modern-day equivalent of a protection racket i.e. it’s yours but only so long as you pay them the ‘tax’.

    If you don’t pay the tax they take your property — legally, of course ;). The whole point of a Govt in a properly run State is to protect property rights, not trample on them.

  7. Very glad it includes the 0L/day numbers.
    Hard to argue that they’re occupied.

    Are those numbers included in the <50? or is it actually 1-50?

  8. Are these places really that hidden? If you’ve got chest high grass blocking the front door , it’s not really subtle.