Wednesday, 27 July 2011
The Neverending Shortage Story
Well, I haven't seen them myself, but I'm assured on a daily basis that Australia has a never-ending critical shortage of housing (despite this, the same media outlets also tell me we need to import hundreds of thousands more workers, but that's a never ending story for another day).
Back to the critical shortage. In short, it's bunkum.
A recent report by Earthsharing Australia has shown the Speculative Vacancy Rate in Melbourne to be almost 5% or 46,220 homes. This is more than double the REIV’s Rental Vacancy rate of 2.4%. Earthsharing have shown that a large volume of housing is being inefficiently allocated to the population, inflating house prices and contributing to urban sprawl. The owners of these vacant homes, property speculators, are investing purely for capital gain, hoping that a greater fool will purchase the dwelling from them later, for a higher price. This type of investment structure is often referred to as a Ponzi scheme.
In 'Real Estate 4 Ransom', Earthsharing's soon to be released documentary, the group will discuss this glut of misallocated dwellings and the impact on Melbourne society. Watch the trailer for 'Real Estate 4 Ransom' below.
Real Estate 4 Ransom Official Trailer from Real Estate 4 Ransom on Vimeo.
In related news this week, the Sydney Morning Herald ran with a sensational article titled 'Tenants run for cover as vacancy rates plummet'. Designed to strike panic into the hearts of tenants everywhere, what followed was a thinly veiled infomercial for the real estate industry. It's going to get worse! Stop renting! Buy now! That was the hidden subtext. But look closer at the statistics (statistics the article manages to brush over quickly before warning us that the 'standard of living for the middle working classes is likely to deteriorate'.
The statistics show that far from vacancy rates plummeting, they're actually relatively flat. In some places, the vacancy rate is rising. In fact, the national rental vacancy rate according to SQM Research is 1.9%, which (apart from a brief rise in 2009) is roughly where it has been since 2005! Furthermore, these figures are likely to underestimate the true vacancy rate, because they only include rental properties advertised for three weeks or more.
Back to those homeless people. According to Homelessness Australia, 105,000 Australians are homeless
on any given night.This is an appalling statistic, given that almost 50,000 homes are vacant in Melbourne alone, and each of those homes could probably comfortably house several homeless people.
Why does the Australian government support the misallocation of housing to speculators, many of whom own multiple dwellings, when over one hundred thousand Australians are homeless? Why do we support those speculators with grants and tax incentives like negative gearing and capital gains tax discounts?
The answer is simple. Our governments are terrified of the economic impact of a property crash. If they don't artificially prop up house prices using these means, then prices are likely to fall, resulting in a decline in GDP, rising unemployment, and ultimately an election loss for that government. That's why every government, regardless of their pre-election commitment to affordable housing, will always encourage higher house prices once they gain office.
Lower house prices would offer dramatic benefits to Australian society. Speculators would be forced to sell the excess dwellings they currently hoard, single income families could once again afford decent housing, and the homeless people could be offered that shelter from the elements they badly need. And those lower house prices would free up disposable income, eventually reduce national debt levels, and enable capital to be allocated to more productive sectors of the economy.
That's my dream. My fear is this won't happen in my lifetime, and it certainly won't happen in sufficient time to benefit my own children, or any children growing up in Australia today. Not while our inept governments are in charge.
Posted by Tony Harris at 7/27/2011 07:18:00 am
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