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.