Despite the fact the country is in a housing affordability crisis and nearly having it, two-thirds of young adults are still living at home, almost 1.2 million dwellings (11.2% of Australia’s total housing stock) were recorded as being unoccupied on the night of the census in August 2016.
This represents a 5 year increase in property prices in Melbourne of 19%, and Sydney of 15%. These two cities are the main centres of the east coast’s property boom.
These numbers could be exaggerated because they include people who were traveling or at another place at the time of the census.
Hal Pawson, an academic from the University of New South Wales has cited Prosper Australia estimates of real home occupation rate rates. Prosper Australia performed modelling on the estimated 1.75 million homes in Greater Melbourne in 2015. 82,000 were classified as “speculative vacancies”.
Pawson believes that this ratio would increase to Sydney, where there would be at most 68,000 vacant homes. Pawson believes there are around 300,000. This would mean that about 3% of vacant dwellings are owned or leased by investors.
Prosper Australia’s findings highlight the extent investment in the housing market is being driven by speculation, with the aim of turning over a quick profit without having to manage the costs associated with leasing out property or ongoing maintenance.
According to 2015 Melbourne data 18,9% of all investor owned properties were vacant. At the beginning of 2017, 40% of all mortgages issued by major banks went to investors. However, this figure has remained above 35% for six months despite ongoing crackdowns from the financial regulator.
Why do investors abandon their properties empty?
There are more vacant investment properties due to the massive rise in property values. Domain Group reports that house prices in Sydney and Melbourne have more than doubled in the last 8 years. The median value for Sydney’s houses increased to over $1.1m, while Melbourne rose to $865.712 in the June quarter.
Investors can retain vacant properties and enjoy an increase in the value of their assets, even with minimal capital investment. Investors can borrow against the property’s current value to purchase other dwellings or speculate.
In the event of a significant increase in house prices, investors may be motivated to sell their property sooner.
The market is driving young people out
A dramatic drop in homeownership has been caused by high property prices and financial speculation, especially among young people.
Grattan Institute models revealed that homeownership dropped to 45% for people 25-34 years old, which is a drop of 6% and 13% respectively over the past ten years.
Additional census modelling by financial planner Robert Snell found that among Sydneysiders aged 25 to 34, nearly114,000 live with their parents even though they are classed as “non-dependent” because they have an income. This means that an entire generation is denied independent housing.
