Earthsharing Australia – Speculative Vacancies in Melbourne: 2012 Report
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.
Discussion (12) ¬
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.
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.
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’?
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.
Peole. Or people as they are more commonly known!
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.
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.
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.