In 2017, federal and state governments in Australia were aghast to hear that, 11.2 per cent of all homes, or nearly 1.1 million homes were vacant on the evening of the 2016 census.
Statistics were flowing like the Cotter Dam after a good downpour.
A quick scouring of the internet came up with the following statistics:
- Vacant property numbers increased by 19 per cent in Melbourne and 15 per cent in Sydney in five years;
- 7,000 Australians slept rough on Census night;
- 400 slept rough in Sydney on Census night;
- Of the 1.7 million homes in greater Melbourne, 82,000 were vacant;
- Australia has 200,000 more homes vacant than it did a decade ago.
Of course, the government pointed the finger at foreign ownership of Australian property and responded in the Federal Budget 2017 – 18 with the following:
“The Government is ensuring that Australian homes are available for Australians. The Government will place a limit on foreign ownership in new developments; introduce an annual charge on foreign owners who buy residential property and leave it vacant; and tighten the foreign investor tax integrity rules to reduce avoidance of capital gains tax on Australian property (Australian Government 2017-18 Budget Fact Sheet 1.6 – Stronger rules for foreign investors owning Australian housing.)”
But, was this a ‘knee-jerk’, ‘xenophobic’ play to the lowest common voting denominator?
Possibly so, as most educated commentators suggested that more than half of the vacant homes (over 500,000) could be accounted for by market turnover. Some homes may have been newly constructed, for sale or deceased estates.
Some property investors will make their property vacant when they decide to sell because it gives them more options to maximise the sale price. Generally, the increase in the sale price for a vacant property drastically outstrips the rent that would come in for, potentially, a full year.
And then, yes, some vacant properties are owned by speculative buyers of sellers who are only in the market to maximise their return from capital growth and not rental income over a long period.
Personally, I think it’s a bit rich for governments to ‘cry foul’ that 10 per cent of the Australian population have taken up their, very generous, incentives to invest in property, rather than putting their money in the bank or the stock and shares.
Basically, the combination of negative gearing and capital gains have pushed mums and dads and young investors into the property market. Governments have acted as the ‘Pied Piper’, leading eager investing down the path – do they really now intend to drown them in the river?
So, is this such a big problem in the ACT or is it all just a storm in a teacup? Well, Prosper Australia, suggests the actual vacancy figure at any time in the ACT is less than three per cent and that this figure would decrease as the property market dampens and there is more incentive to earn income from rent rather than speculative capital gains. They also suggest that these vacant properties only add between one to two per cent to rental prices.
But, what do the local Canberra experts have to say? The RiotACT spoke to Chris Miller, Managing Director, Vantage Strata about owners and investors’ parking property in Canberra.
“A number of my contemporaries in other Australian cities have started to see higher instances of apartments being purchased off the plan and never becoming occupied. Ostensibly this is being driven by offshore buyers, although the cause is not entirely clear and is not necessarily due to an oversupply of rental stock per say.
“It is being raised as a challenge within the strata industry, mainly for operational reasons. An offshore owner who, for whatever reason, is not motivated to have their apartment occupied may also find it difficult to pursue strata levy payments – as the argument goes.
“That being said, I can say pretty confidently that this phenomenon really isn’t a feature of the Canberra apartment market. All of the indicators suggest that the current supply will be met by demand, and any attempt to make this an issue is hot air in my opinion,” Mr Miller said.
ACT property guru and Colliers International ACT CEO, Paul Powderly, said the ACT didn’t have an issue with foreign investment or parking property.
“We’ve only had about 300 properties purchased by foreign investors in each of the past two years, and most of these have been for students studying at the ANU or for people living locally,” Mr Powderly said.
“Canberra hasn’t seen the hot markets of Sydney or Melbourne, so hasn’t been hit by speculators. We have a healthy supply of 17,000 units coming online in the next three years, with demand of around 4,000 units per year,” Mr Powderly said.
So, in conclusion, it seems that some journalists had fun with statistics coming out of the 2016 Census that led to a pretty knee-jerk reaction from Government to whack foreign investors.
But, here in Canberra, seems to be the ideal place to invest in property for the right reasons. Strong, long-term rental income and steady capital gains over time.
Do you think there is an issue with foreign property investment in Canberra and properties being parked for capital gain rather than being rented out?