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The key to housing wastage

By Karl Fitzgerald - posted Tuesday, 25 November 2014

Despite Melbourne's record-long housing affordability crisis, 64,386 empty homes were quantified in 2013. Vacancy hotspots surrounded the usual suspects of prime location, infrastructure, culture and education. This Housing Supply Crisis is aided and abetted by an ineffective taxation regime.

But you wouldn't know so many vacancies existed if you watched the published vacancy rates. The vacancy rates mentioned in the press do not include those properties held empty by speculative investors chasing capital gains. They only include those properties advertised 'for rent'.

Prosper Australia identifies empty homes by analysing abnormally low water consumption rates averaged over 12 months. We believes this trend of hidden vacancies is national and must be investigated the longer this housing crisis continues.


With investors now running at some 50% of all housing loans (up from 12% in the mid 80's), the effects are starting to add up. The divergence between rental income (median $18,000 per annum) and capital gains ($60,000) is accelerating. An increasing number of property investors are choosing to leave their properties empty. Some investors acknowledge that by leaving 10-20% of their growing property portfolio empty, they will enforce scarcity, pushing rents and prices upwards.

Seven out of ten inner Melbourne apartments are owned by investors. But according to the Housing Supply Crisis meme, this does not crowd out first home owners.

The re-zoning fervour Victorian Planning Minister Matthew Guy has enacted means little in an era where housing supply is subservient to property speculation. Despite record construction rates, vacancies in trendy Abbotsford have more than doubled to 18.3%. West Melbourne also doubled. Docklands has a shocking 31.6% of all property vacant. But still prices head upwards.

Victoria's leading export industry is tertiary education. International student interest in the Australian way of life is undermined by the welcoming mat property speculators leave out. In Carlton South students pay $2,300 per month for a one bedroom apartment but vacancies total nearly 15%.

In a poignant example of socialising the losses and privatising the gains, we have a Federal 'infrastructure government' promising to build more roads. Infrastructure is code for 'developer welfare'. Some may get to travel to work faster, but the vast majority of the gains are capitalised into ever higher land prices for those who own prime locations near the on/off ramp (or train station).

The new Williams Landing train station cost a whopping $110 million. But the thanks the public receives is a virtual tripling of the vacancy rate to 10.2%. Land prices have increased there by 18.5% since 2009.


Vacant land is akin to the unemployment rate for our most valuable resource. If a 10.2% unemployment rate existed, there would be an outcry and a series of investigations into this market failure.

Cedar Woods are the lucky developers who own the land surrounding Williams Landing. They also just happen to own much of the neighbouring land to the West Footscray train station development, where properties have been slowly drip fed to the market over the last five years, with signage proudly stating 'we've saved the best till last.'

Dennis Family homes is another developer to have done well out of publicly financed infrastructure. A website laced with corporate social responsibility buzzwords and Queen's Day honours does little for affordability. Two $50 million train stations have virtually been built for them. They are set to enjoy more than $100m in land value uplifts from the hundreds of acres they own surrounding the Wyndham Vale and Tarneit stations.

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About the Author

Karl Fitzgerald is the Projects Coordinator for Earthsharing Australia.

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All articles by Karl Fitzgerald

Creative Commons LicenseThis work is licensed under a Creative Commons License.

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