Australia acts to bust 'ghost houses' problem

File photo of the Sydney suburb of Enmore in Australia.
File photo of the Sydney suburb of Enmore in Australia. PHOTO: REUTERS

Govts mull over taxes to penalise investors who leave homes empty and add to supply crunch

Australian property experts have become adept at spotting the telltale signs of a "ghost house" at night - and it has nothing to do with doors slamming shut by themselves.

Clues, however, can be spooky. They include empty balconies and lights out at night, according to Mr Cameron Kusher, a researcher at property data company CoreLogic.

"In certain places around the country, you walk through the city at night for a few nights in a row and you see lots of apartments with lights off or without furniture on the balcony," he told The Straits Times. "They don't look like they are occupied."

By ghosts or anyone else, he might have added. Experts say there could be as many as 300,000 vacant properties around the country. Most have been bought by investors - many of them from overseas - and are adding to the overheated property market.

The phenomenon has triggered concern among the federal and state governments, which have flagged a crackdown as they seek to encourage lower rents.

  • NO ONE HOME

    90k

    Empty dwellings in Sydney last year.

    80k

    Unused properties in Melbourne in 2014, based on water usage.

Ahead of the federal Budget next month, the Treasurer, Mr Scott Morrison, said he was concerned about foreign investors owning "latent stock" which reduced the availability of rental properties.

"The other area that (affects) housing supply is foreign investors coming in, buying units basically as a form of passive investment, not tenanting them and taking stock out of the market," he told ABC Radio on April 10. "Now I can tell you that's something that's got my attention."

The comments prompted debate about whether states and territories should impose extra costs on foreign investors and owners of vacant properties. Some states - including New South Wales, Victoria and Queensland - already impose their own taxes on foreign investors.

Last month, the Victorian government announced plans for a new tax on owners who keep properties vacant for more than six months. The plan, to start on Jan 1, involves a 1 per cent tax on the value of the home - similar to that in Vancouver, on Canada's west coast.

There is a push for similar penalties for home owners in London.

Victoria's vacancy tax, believed to be Australia's first, it is expected to raise about A$80 million (S$84.3 million) over four years.

Premier Daniel Andrews said the move was aimed at freeing up properties in the inner city of Melbourne and will not apply to holiday homes or people who have a city apartment for work purposes. "This will send a really strong message to people who are effectively banking an empty property and denying that to the market and contributing to the lack of supply," he said.

The Australian Capital Territory, which includes the capital Canberra, is considering a similar tax. Mr Morrison told 2GB Radio: "Good on them for having a crack at this."

Research by the City Futures Research Centre at the University of New South Wales (UNSW) last year found there were about 90,000 empty dwellings in Sydney. Separately, a study based on water usage found 4.8 per cent of properties in Melbourne in 2014 - about 80,000 homes - were unused.

Experts said the large number of vacant properties is a result of Australia's booming housing market, which is encouraging investors to speculate. Many investors leave a property vacant because the sale price can be higher if the home has no tenants.

Many of the owners of vacant homes - albeit a minority - are believed to be foreign buyers, especially from China. Property agents say these investors want to move their money out of China but may not want to move to Australia. Some come occasionally for work or are keeping their homes for their children to live in as students.

The UNSW researchers blamed the government's tax breaks for property investors, especially "negative gearing" which allows tax deductions for interest  paid on loans used to buy investment properties. This can provide a disincentive to people to rent out homes because they will be forced to claim a smaller deduction.

Numerous analysts, including Mr Kusher, noted that vacancy taxes are difficult to enforce because it is hard to know if a property is unused. As he noted, some properties which appear vacant may be holiday homes or belong to people who are out of town.

Others have noted that analysis of water or electricity meters can simply encourage unscrupulous owners to leave taps or lights on.

A version of this article appeared in the print edition of The Straits Times on April 24, 2017, with the headline 'Australia acts to bust 'ghost houses' problem'. Print Edition | Subscribe