The ABS data is grouped per state and per city, and while the increase in vacant houses is larger for the country overall than it is for the capital cities, the major cities did register an increase in vacancies.

The ABS figures don’t show how many of these unoccupied dwellings are even intended as ‘investment’ properties. I wouldn’t be surprised if a large proportion of these are holiday houses/second dwellings. There has been significant growth in the wealth of the top 20% of Australian families and second housing is fairly popular in that segment. Speaking of which it would be interesting to see how the real mortgage interest/real wages breaks down in to the various quintiles.

I think there is enough land available, but this land is in the hand of developers or landbankers which can finance their purchases and carrying costs very cheap with international financing. They can afford to carry the costs of owning this land without any development for a long time. It is in their interest to hold or slowly release in order to prevent a price decrease. Scarcity will generate huge capital gain…. for which you can buy more land with low holding costs to grow the portfolio.

I think you can see this in part in the land sales on the internet. Sets of small pieces of subdivided land for sale for months and months without any price reduction. Look around Cairns and Mackay where whole cane farms are bought out …. and sit as deserts waiting to be built.
I would love to see hard data which parties hold how many titles.

This is why IMO releasing more governmental land available is a farce. It will be snapped up by those ‘developers’ who have the cheapest financing and they will just hold it. Also the size of the releases make it impossible for private parties to buy anything. So in the end the developers/hoarders will benefit.

As said before; IMO the only way to solve the situation is making holding land unproductive prohibitively expensive. There is more to it, but to get the gist: e.g. introduce a yearly penalty of 20% of the purchase price (larger than the expected capital gain) for owning a third property title if that block is not being built after three years.

I think the the discussion needs to shift to the question if you want as society that essential resources like land and housing are hoarded for capital gain. If not, than have a look how you can force such ‘hoarded’ properties back on the market. As a temporary measure I can even imagine you will allow property to be sold to the government for purchase price indexed for CPI and then have the government auction 10% of their stock.

And BTW Steve,
if you get a chance on Insight pls. let them show that ‘debt vs. GDP’ graph … and the also graph with the low percentage of money being used for new building (which undermines the whole negative gearing argument).
These graphs tell more than 1000 words. Most shows have too much discussion and spend no time on the objective facts.

The problem is not high interest rates, but ridiculous record debts that people have taken in chasing houses and capital gain.

So, we can see that there are over-supply of unwanted new houses in parts of Sydney and over-demand of housing in other parts.

On Insight, the program isn’t solely on household debt–it’s on the election, which it has to be given the timing of the program. But you can be sure I’ll raise it as the “elephant in the living room” of the electoral debate–and I suspect that’s a major reason why SBS approached me as well.

Finally, couldn’t agree more with Yohan that “The only way to alleviate the rental crisis in this country is to see a sustained drop in the value of investment properties so that the owners see rental income as their main source of income rather than 20% a year capital appreciation.” I’ve put precisely such a recommendation at the end of an opinion piece that will run in The Age (and perhaps the SMH) in the next couple of days. It will form the gist of this week’s blog (which I’m delaying a bit till The Age piece comes out) entitled “Both Are A Plague on our Houses”

Steve, looking forward to next weeks ‘Insight’ usually a good show – I may even send a reminder around work.

It shows real rent costs have remained incredibly stable over the last 34 years while the real costs of ownership have varied wildly. If landlords truly were able to pass their costs on to renters, I think these charts would be different.

Okay, I’m done now. Seriously!

Regarding US overbuilding, Hired Goon (GHPC) did a little digging and came up with the following figures:

- – - – - – - – - -
US:
Population growth 01-06 : 4.97%
Dwelling growth 01-06 : 7.18%

US Overbuilding 01-06 : 44%

population: http://www.census.gov/popest/states/NST-ann-est.html
dwellings: http://www.census.gov/popest/housing/HU-EST2006.html

From the census, 2001 – 2006 Australia increased:
Population growth 01-06 : 5.78%
Dwelling growth 01-06 : 8.17%

Overbuilding: 41%
- – - – - – - – - -

Now that’s population, not households. Household formation depends on age distribution and social trends. So let’s look at dwellings versus households. From the ABS census, we have:

Total private dwellings (2001) : 7,790,079
Total private dwellings (2006) : 8,426,559
Change 2001 – 2006 : 636,480 (8.17%)

Occupied private dwellings (2001) : 7,072,202
Occupied private dwellings (2006) : 7,596,183
Change 2001 – 2006 : 523,981 (7.41%)

And we can extrapolate:

Vacant private dwellings (2001) : 717,877
Vacant private dwellings (2006) : 830,376
Change 2001 – 2006 : 112,499 (15.67%)

Now onto households. From HOUSEHOLD COMPOSITION – OCCUPIED PRIVATE DWELLINGS, we get the following totals:

Households (private dwellings – 2001) : 6,744,795
Households (private dwellings – 2006) : 7,144,097
Change 2001 – 2006 : 399,302 (5.92%)

Now that doesn’t seem to tally perfectly with anything above, but take your pick of Occupied private dwellings or Households, and it’s clear that building has exceeded household formation, hence the rapid growth in the number of vacant dwellings.

We can also look to the construction and building permit statistics from the ABS, but it’s just more of the same. We’ve built plenty of houses right through the boom, and despite the cries of doom from the HIA (“building insufficient houses for underlying demand”), there is no evidence this is true. Even the recent low of 150,000 dwellings per annum (annualised) would exceed the requirements of our current population growth.

Cheers, F.

Look forward to Insight next week Steve. What’s the topic (please tell me it’s household indebtedness!)?