Foreign buyers behind Melbourne’s hidden housing vacancies
- Found this article on http://www.news.com.au/finance/real-estate/foreign-buyers-behind-melbournes-hidden-housing-vacancies/story-fndba8uq-1227120561669
- 2 days ago November 12, 2014
FOREIGN investors risk turning parts of Melbourne into a city of “ghost towers”, a new report has found.The Prosper Australia study estimated that 64,386 or 4.4 per cent of Melbourne’s housing stock was potentially vacant.
The tax reform group’s seventh Speculative Vacancies report calculated the number of “overlooked” vacancies in Melbourne based on a property’s annual water consumption.
Properties with abnormally low water usage of less than 50 litres per day in 2013 were considered to be vacant.
Docklands topped the list, with 17 per cent of properties not consuming any water over the year and 27 per cent using less than 50 litres per day.
The growth suburbs of Cardinia, Clyde and Clyde North were next with a combined 46.7 per cent of properties considered vacant. Carlton South was third with 12.7 per cent.
Prospect Australia project director Karl Fitzgerald said if corrective measures weren’t taken the city would see a “ghost tower” trend emerging in Melbourne.
He said the ghost towers would have domino effect on the local economy including on shops and employment.
Mr Fitzgerald said foreign buyers keen to cash in on Melbourne’s strong property price growth were a key reasons for the vacancies. They were happy to leave properties empty because of poor rental returns in Melbourne.
“There is less and less incentive for property investors to rent out their property as they wait for capital gains,” he said.
“We hear anecdotal reports that 80 per cent plus (of apartment towers) are being sold to foreign investors.
“These types of investors have a long time view and are quite happy to sit back and enjoy the capital gains.”
Mr Fitzgerald said negative gearing had also created a glut of empty rental properties by encouraging investors into the market.
Mr Fitzgerald said the overall vacancy figures would be even higher if reported vacancies were taken into account.
The group is calling for stamp duty to be replaced with a broadbased land tax that would impose “holding costs” on investors.
Industry expert Catherine Cashmore, who will be speaking at Prosper Australia’s presentation tonight, said the large number of vacancies would have a serious effect on housing affordability.
“There are all sorts of reasons why a home can be left empty,” Ms Cashmore said.
“Around seven in 10 investors are in apartments in inner-city areas … we are also seeing a lot of unit stock that is being constructed.
“What we found is as the supply goes up, so too do the vacancy rates.”
Ms Cashmore said a lot of the stock was of poor quality, with some likely to have trouble attracting and keeping tenants.
She said cultural reasons might also be behind the empty apartments, particularly in the CBD.
“There is a high proportion of foreign ownership within the city,” Ms Cashmore said.
“We do know from a cultural perspective that in Asia and China it is quite natural to leave properties empty.
“It is actually advantageous to leave it empty because it keeps that new appeal of the apartment. As soon as you have a tenant moving in it, there is damage that can be incurred and that can bring the property price down.”
Prosper Australia will present its report at a public presentation at 6.30pm on Wednesday, November 12, at 2/22 Punch Lane, Melbourne.