Earth­shar­ing Aus­tralia — Spec­u­la­tive Vacan­cies in Mel­bourne: 2012 Report

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Earth­shar­ing Aus­tralia, in col­lab­o­ra­tion with Pros­per Aus­tralia and the Land Value Research Group (LVRG), has put together the Spec­u­la­tive Vacan­cies in Mel­bourne: 2012 Report, authored by Philip Soos. The report is for­mu­lated from water usage data pro­vided by City West Water and Yarra Val­ley Water to esti­mate prop­erty vacan­cies in the Mel­bourne area.

Earth­shar­ing Aus­tralia has been pro­duc­ing the Spec­u­la­tive Vacan­cies report annu­ally since 2008. The report clas­si­fies a vacant prop­erty as real estate show­ing water con­sump­tion less 50 litres per day (50L/d) aver­aged over the six months period, July-Decem­ber 2011.

North Essendon revealed the high­est vacancy rate of 14.6%, with 212 prop­er­ties below the 50L/d water usage, out of 1449 sur­veyed prop­er­ties. Fol­lowed closely by Dock­lands, at 14.1%. How­ever, the argu­ment that Dock­lands have pri­vate stor­age facil­i­ties with sep­a­rate water metres has been debated.

Philip sug­gested, ‘the the­ory as to why so many homes are empty is due to the tor­rent of annual cap­i­tal gains out­weigh­ing net rental income by a mul­ti­ple, thus some land­lords may believe it is bet­ter to let prop­er­ties sit empty while the land appre­ci­ates in value.’

What were even more alarm­ing were the com­mer­cial prop­erty vacancy rates. The well-adver­tised Car­o­line Springs showed a whop­ping 64.6%, with 181 of 281 prop­er­ties below the 50L/d water usage. Notably, com­mer­cial real estate would likely have less depen­dence on water usage.

The report also addresses some of the alter­na­tive method­olo­gies for mea­sur­ing prop­erty vacan­cies, such as the Real Estate Insti­tute of Vic­to­ria (REIV) and SQM Research, and the strengths and weak­nesses in their approaches.

This report damp­ens the hopes of a sus­tained increase in house prices after a home prices jump after RBA cuts. The increase in Poten­tial Long-Term Vacancy Rates in Mel­bourne from 4.94% in 2010 to 5.90% in 2011 is likely to equate to fur­ther down­ward pres­sure on Mel­bourne home val­ues.

It is refresh­ing to read a report from an unbi­ased insti­tu­tion with purity in con­tent. Many thanks to Philip Soos, Earth­shar­ing Aus­tralia, Pros­per Aus­tralia and LVRG, for pro­duc­ing this valu­able per­spec­tive.

Earth­shar­ing Aus­tralia is an orga­ni­za­tion based in Mel­bourne that seeks to advance eco­nomic effi­ciency and social jus­tice through tax reform and edu­ca­tion. Along with its part­ner orga­ni­za­tions Pros­per Aus­tralia and the Land Val­ues Research Group (LVRG), it is at the fore­front of advo­cat­ing ideas and poli­cies based upon the work of the U.S. clas­si­cal lib­eral econ­o­mist Henry George (1839- 1897), who believed poverty and social dis­or­der stems from the mis­use of the third fac­tor of pro­duc­tion, land. By advo­cat­ing the cap­ture of the eco­nomic rents of nat­ural resources, Earth­shar­ing Aus­tralia pro­motes the elim­i­na­tion of behav­iour-dis­tort­ing taxes on cap­i­tal and labour.

About Steve Keen

I am Professor of Economics and Head of Economics, History and Politics at Kingston University London, and a long time critic of conventional economic thought. As well as attacking mainstream thought in Debunking Economics, I am also developing an alternative dynamic approach to economic modelling. The key issue I am tackling here is the prospect for a debt-deflation on the back of the enormous private debts accumulated globally, and our very low rate of inflation.
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  • Kurt Black­well

    I read a lit­tle bit of the report, so maybe I missed some­thing, but how do you go from an aver­age of 140L pp/day to the cut­off of 50L/day? An aver­age says noth­ing of the dis­tri­b­u­tion.

    It seems like they’re just mak­ing num­bers up.

  • tad­dles

    50 litres seems a high cut-off. It should be slightly more than a con­stantly drip­ping tap. A shower can be had with 5 litres as campers know.
    The com­mer­cial prop­erty anhy­drous rate is so high to ring alarm bells at the method­ol­ogy.

    No doubt vacancy rates are higher than the indus­try exhorts but the stats of the face­less organ­i­sa­tions you quote are worth­less. I expected bet­ter in this blog.

    The stu­pid­ity of the so-called “Proper Aus­tralia” is shown by their state­ment that:

    Australia’s eco­nomic sys­tem should encour­age work and reward enter­prise.”

    They go on to lay claim to the fruits of the suc­cess of other peo­ple.

  • The Land Value Tax peo­ple have got the idea that the sole
    source of Tax Rev­enue should be “Land Tax” — so if you have prop­erty
    and a rail­way sta­tion opens up nearby then your prop­erty is worth more — but as you have done noth­ing to ‘earn’ this then this increase should be income to peo­ple so you should be hit with a large tax bill.
    But such a tax would have to be added to the costs of the goods you pro­duce at the site and then reclaimed off the con­sumers in prices. Such a rise in costs would bank­rupt small com­pa­nies or drive them to other loca­tions, leav­ing prime sites under­used or used by only big com­pa­nies with good credit lines with the banks who could maybe bet­ter absorb afford these shocks. This enhances the posi­tion of big busi­ness and the bank­ing sys­tem rel­a­tive to the indi­vid­ual and if that’s what you are after then this is a good idea oth­er­wise its just another paving stone of good inten­tion on the road to Hades.

  • Steve Hum­mel

    Yes, even though Henry George was prob­a­bly one of the smartest and most aware indi­vid­u­als of the 19th cen­tury his sys­tem is still an attempt to over­come Mam­mon with the power of Leviathan. They are too crafty to allow that to hap­pen. The only real way to defeat Mam­mon is to uti­lize his power, money, directly against him and with the intent of free­dom. And you accom­plish that by dis­pelling the false notions of BOTH the rigid right­eous­ness of the puri­tan­i­cal work ethic and that progress belongs only to the finan­cial com­mu­nity instead of its right­ful owners.….everyone.

    And Leviathan? Instead of using his tools of enslave­ment in an attempt to free us, use them as spar­ingly as pos­si­ble and return that power back, again, to the indi­vid­ual. That way there will be the ten­dency for “the state to wither away” at least in its most dom­i­nat­ing form and its proper task of admin­is­ter­ing jus­tice is left in place.

    See what power the will to free­dom for the indi­vid­ual has?

    Sermon’s over. Where are the Won­der Bread and Sushi ven­dors that promised to cater this event for nothin’? 🙂

  • Derek R

    Pedant’s cor­ner: A water meter is a piece of mea­sur­ing equip­ment; a water metre, if such a thing existed, might be a unit of mea­sure­ment for mea­sur­ing water sim­i­lar to the SI metre. “Proper Aus­tralia” is a con­ti­nent; “Pros­per Aus­tralia” is an organ­i­sa­tion devoted to improv­ing the pros­per­ity of peole liv­ing on that con­ti­nent.

    And the land tax peo­ple actu­ally say that the extra tax comes out of the rent paid at the site and so does not need to be added to the cost of goods. There is good evi­dence from Enter­prise Zones in the UK to show that Rent goes up when Land Tax goes down (and vice-versa). SO the cost of pro­duc­ing wid­getrs is not affected.

    And finally the high vacancy rate for com­mer­cial real estate shouldn’t be sur­pris­ing. Land­lords often keep a por­tion of their premises out of use in order to raise rents on the oth­ers. If the elas­tic­ity of demand is right this may lead to higher rev­enue for a land­lord than putting them all to use would. In a ris­ing land mar­ket, this strat­egy is par­tic­u­larly effec­tive.

  • Derek R

    Peole. Or peo­ple as they are more com­monly known!

  • David Col­lyer

    Gosh! What awful, mis­guided peo­ple Pros­per Aus­tralia are! Want­ing to tax land and min­ing and… untax wages and busi­ness. We don’t want to use gov­ern­ment power to crush wealth, we want to deflect behav­ior from rent-col­lect­ing and land spec­u­la­tion, to chan­nel cap­i­tal to risk-bear­ing, to devel­op­ment and to cre­ate pros­per­ity.

    Debt­watch is appalled by the credit applied to inflat­ing land prices. We are too. 

    Imag­ine instead we had used SOME of that debt to buy min­ing com­pa­nies on the Lon­don Stock Exchange. We could now own BHP, Rio, Vale, Glen­core etc for a frac­tion of the money wasted in our stu­pid stu­pid land bub­ble. Instead, we have 1.2 mil­lion tax­pay­ers neg­a­tively geared into rental prop­er­ties in a falling mar­ket — solely because of poor tax design.

    It is easy to demo­nize change and deter a nation from reform. The harder path is of faith in our abil­ity to improve our lot through the care­ful and con­sid­ered man­age­ment of what we tax and where.

  • Derek R

    Well said, David. Pros­per Australia’s poli­cies do exactly what Prof Keen says needs to be done. They make it less attrac­tive to spec­u­late in land which is the main Ponzi scheme, and more attrac­tive to invest in man­u­fac­tur­ing indus­try where the chances of a Ponzi scheme are much lower.

  • LVT in effect turns what is now a lump sum pay­ment for prop­erty pur­chase into a con­tin­u­ing stream of pay­ments. This is why it doesn’t add to costs — the costs are already there either being paid as loan repay­ments or as return on cap­i­tal.

    That said, Propser Aus­tralia and the asso­ci­ated entites are only half way there. They suc­cess­fully nego­ti­ated the ‘recog­ni­tion of com­mu­nity con­tri­bu­tion to pri­vate inter­ests’ but get all squea­mish when the obvi­ous inverse — ‘recog­ni­tion of pri­vate con­tri­bu­tions to the com­mu­nity inter­est’ is brought up.

    Set­tle both sides of that equa­tion and you end up with an effec­tive damp­ener on the effects of spec­u­la­tion, as well as a very effi­cient tax basis.

    Finally, LVT is not a very good pack­ag­ing of the idea con­tained within it. It is far more palat­able pack­aged as a form of land title, rather than as a form of tax­a­tion.

    A tran­si­tion to that form of land title could quite rea­son­ably be impli­mented as a means of resolv­ing the ‘debt for­give­ness’ cur­rently required.

  • Steve Hum­mel

    Intu­itiverea­son,

    Good points on the pack­ag­ing. The prob­lem is that Land is already rec­og­nized as a fac­tor in pro­duc­tion and so regres­sive forces can appear to answer it by say­ing its already fac­tored in. If you con­tem­plate the value of the accu­mu­lated tech­no­log­i­cal inno­va­tion and progress and its effects on increased pro­duc­tiv­ity then as a com­mu­nity owned her­itage it could also be used for debt for­give­ness and an ongo­ing div­i­dend that every­one was actu­ally enti­tled to.

    Regard­less, I have always admired Henry George and the Geor­gist per­spec­tive. Its recog­ni­tion of the moral bank­ruptcy of poverty amidst plenty is its true power.

  • Not sure what you mean by ‘regres­sive forces’ in this con­text Steve.

    A lot of what you would do if you applied Geor­gian thought both ways (col­lec­tion from pri­vate to pub­lic, dis­tri­b­u­tion from pub­lic to pri­vate) is already in place in a semi arbi­trary man­ner — even with­out the struc­ture that George pro­vides, the appro­pri­ate actions are obvi­ous enough that they crop up.

    It also high­lights areas where the cur­rent prac­tice is com­pletely reversed from a log­i­cal posi­tion — mostly to do with tax­a­tion, but hardly lim­ited to it. Pay­roll tax is per­haps the most egre­gious exam­ple.

    Other beau­ties of the sys­tem include auto­matic and imme­di­ate dis­as­ter relief — think about the imme­di­ate change in land value that occured after the Bris­bane floods. Imme­di­ately there occurs a mas­sive drop in the land value and assis­tance is deliv­ered through the reduc­tion in ongo­ing charges.