The Melbourne local government areas with the highest number of vacant properties have been revealed. According to new data released by the State Revenue Office (SRO), Melbourne has the highest number of vacant properties (more than 2,500), followed by Moonee Valley (1,800), Glen Eira (1,300), and Port Phillip (1,300).
The estimates were based on water usage – though the SRO uses other measures to determine the occupancy status of homes. Overall, up to 20,000 properties in metropolitan Melbourne were deemed vacant.
The Andrews government is set to reap an estimated $80m over the next four years by taxing vacant residential properties annually. The vacant residential land tax – which will take effect on January 1, 2018 – is set at 1% of the capital improved value (CIV) of taxable land.
“For example, if a vacant home has a CIV of $500,000, the tax will be $5000,” the SRO said.
The government encourages owners to make their vacant properties eligible for purchase or rent, with exemptions made for holiday homes, deceased estates, and properties being renovated.
“This will send a really strong message to people that if you are effectively banking an empty property and denying that to the market and contributing to the lack of supply, then there's something you can do about it,” Premier Daniel Andrews said. “You can simply pay the tax or you might go see a real estate agent.”
A huge oversupply is about to hit Melbourne
While the government is doing its part to boost the supply of available housing in Melbourne’s inner and middle suburbs, Simon Pressley, head of property market research at Propertyology, says the new tax could have a devastating impact on the local property market.
“Up to 20,000 extra Melbourne apartments currently sitting vacant could hit the market within a few months,” he said. “Whether the owners respond to the new vacancy tax by adding these properties to Melbourne’s rental stock or resale stock, either way there’s a huge over-supply that’s about to swamp Australia’s second biggest city.
“The Victorian state government’s vacancy tax effectively means that up to 20,000 property owners will be slugged $5,000 per year on a typical property worth $500,000. It’s up for debate as to whether that’s ethical or not. But the knock on effect of this new legislation could have bigger consequences than the state government has probably thought of.
“Some of these property owners might just suck it up and pay the extra freight but logic would suggest that a high proportion will either sell the property or put it on the rental market as the government wants. Either way, that will saturate Melbourne’s market with an enormous amount of extra rental and resale stock.
“And, with so much supply of new property already slated for Melbourne combined with APRA’s changes and persistent bashing of investors, there’s a very real possibility of falling rents and property prices.”
Pressley added that the oversupply will affect the broader market. “Dejected property owners en masse equates to widespread low consumer confidence, an impact of retail trade, fewer property transactions, lower demand for jobs in the broader property sector, reduced stamp duty revenue for state government coffers … All levels of government need to take a big breath and think about this,” he said.
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