In such a tight rental market are there really vacant apartments? Well there are reportedly almost 100,000 apartments or houses “vacant” in Melbourne.
How can this be? Why would people leave a property empty for so long?
It appears there are many reasons. Some more rational than others.
The most recent report by Prosper Australia, is their 11th into Speculative Vacancies. The report reviews water usage (or lack of it) in every property across 200 postcodes in metropolitan Melbourne. It then defines a property as “vacant” if it uses less than 25% of the average annual water usage of a single occupant. (so less than 50 litres per day)
With many people desperately looking for a home it seems incongruous to have so many vacant homes. However, it is an over simplification to say these vacant homes should be made available for social or market housing. That would be a little bit like saying a labour shortage is due to people who don’t work and they should come back to work. Some people choose not to work for their own reasons. Lucky them. 😊
Similarly some property owners choose to leave their property fully or partially vacant for a myriad of reasons.
So what are these reasons and why are so many apartments and houses “vacant”? Here is the list. Feel free to add yours below.
1. An old property that is not habitable or falls short of the statutory standards.
2. Investor apathy. Maybe after a bad leasing experience.
3. Tax strategy / avoidance.
4. Unsold developer held apartments.
5. Prolonged estate / sale / settlement issues.
6. Holiday homes (within metro Melbourne).
7. City pads for country or interstate owners.
8. Short term rentals like Airbnb with low occupancy.
9. To retain flexibility for future sale or occupancy.
10. Undergoing a renovation or new build including vacant land (that has a water meter)
11. Foreign owners who culturally don’t wish someone else to occupy their property.
12. Foreign owners living in politically unstable countries or view it as a wealth store only.
The regulations controlling tenants’ rights and standard of rental accommodation in Victorian properties are about the highest in the country. Minimum standards for housing are important, but like any regulation there can be unintended consequences. These include properties that don’t meet those standards being left vacant as well as investment owners selling due to large taxes or the cost of rental compliance.
More broadly, this high level of vacancy is a significant waste of resources. It raises questions about urban planning, regulatory framework, building controls and costs, economic policies and social dynamics. Constructive discussions to address these issues and better utilise wasted resources would help.
The Victorian government recently introduced the Vacant Residential Property Tax to discourage owners leaving their property vacant. This along with a rise in land tax has encouraged many owners to sell. Some of these properties include future rental accommodation.
Freeing up the underutilised housing store is a complex issue. Taxing it directly reflects a lack of interest or ability to understand the underlying issues and work through them. Several of the reasons properties are left vacant result from a degree of market inefficiency. Some of these reasons may also speak to the lack of new construction overall.
