New Report Reveals Melbourne Housing Shortage is Bogus

Alert! Billionaire Harry Triguboff is now sounding a warning. He says councils around the country are approving too many developments.

That’s because councils want the stamp duty and other forms of income those developments give them. As far as Harry’s concerned, that’s too many developments relative to the number of people coming into Australia right now.

Harry is one of Australia’s richest men. His company, Meriton, is Australia’s largest residential developer. On December 1 The Australian quoted him as saying,

If we want to succeed, we must bring in more people. Unless we increase immigration we will fail, and I see is this as our greatest potential problem because big increases in approvals depend sooner or later on an increase in population, which can only happen if we have more migrants.

As we are approving more buildings, we must simultaneously increase migrants. If migration is held back and we return to a modest number of approvals, then we will suffer because the country and the councils cannot survive without more housing.’

Australia’s economy policy: import more people to fill buildings 

Is Harry seeing a stall in the price of apartments he is trying to sell? Perhaps I’m being too cynical.

Let’s not pay any attention to his motives or his economics. But he is a developer after all. Perhaps Meriton has a lot of supply coming onto the market in two years’ time and they want to see more buyers from immigration.

You could say Australia is a bit behind on this front. Over in the UK, Prime Minister David Cameron pledged in the prior election to reduce the number of people coming into Britain. This was in response to the popularity of the UK Independence Party (UKIP), which wants Britain to cut immigration and leave the European Union.

The net migration figures for the UK for this past year were released in late August of 2015. The most people — ever — have decided to make the UK their home. Annual net migration to Britain hit a record level of 330,000 according to the Office for National Statistics. And this figure was prior to the Syrian refugee crisis.

Here’s why the push happens in both countries: it keeps the property game going. It also keeps real estate prices high and wages low.

Whether Australians want a bigger population or not, that’s what we’re going to get. It is simply not negotiable for alternative funding methods or growth strategies be explored. The predatory and rent seeking nature of the Finance, Insurance and Real Estate (FIRE) sector has hijacked the economy and government policy all over the West.

As far as Melbourne is concerned, Harry’s warning is already too late. There ARE too many apartments and empty housing stock. It’s just nobody can see them.

Buyer’s advocate and Contributing Writer to Cycles, Trends and Forecasts Catherine Cashmore wrote Prosper Australia’s latest Speculative Vacancies report. It was released yesterday. ‘Speculative Vacancies’ (SVs) are properties assessed with abnormally low water usage. The report covers the Melbourne area.

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Melbourne’s mainstream vacancy rate is bogus

To give you some idea, 82,724 properties around Melbourne use less than 50 litres a day. That’s the equivalent of a dripping tap and far less than even a single person’s daily usage, according to the Australian Financial Review

Nearly 20% of investor owned stock is empty.

The report reveals the famous ‘housing shortage’ we hear so much about is completely bogus, at least as far as Melbourne is concerned. The issue is obscured because land and buildings (both commercial and residential) that are empty or idle, but not reported by the owner as vacant, are not included in the mainstream government or real estate industry vacancy statistics.

Take a look:

This report gives ample evidence of an unused surplus, which indicates oversupply, rather than undersupply. Falling rents and rising prices are indicative of this trend.

Unlike capital prices, rents are tied to wages and are not subject to leverage or generous rent-seeking tax incentives. 

Tenants cannot rent above their capacity to pay. Investors seeking long-term tenancy are therefore subject to the laws of supply and demand. If there were a genuine housing shortage, we would see rising real net rents. Falling or stagnating rents indicate the opposite.

Hence, the rise in dwelling prices cannot be used to infer the existence of a housing shortage. When falling rents are viewed in context of the number of SVs, it is clear that there is a surplus of vacant accommodation.’

Make sure you read the report. It identifies the suburbs with most estimated speculative vacancies and the issues you need to be aware of as an investor and citizen. When the next property slowdown or downturn hits, Catherine warns that these empty properties will come on the market.

Of course, I don’t expect the government to do anything about it. After all, this is the eighth edition of this report. We live in a Monopoly economy. The rules of the game don’t change.

That doesn’t mean you should avoid real estate entirely. As an investor, just be aware of the traps along the way. The best way to do that is here.

Callum Newman,

Associate Editor, Cycles, Trends & Forecasts

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Callum Newman

Callum Newman

Callum Newman is the editor of Markets and Money and Associate Editor of Cycles, Trends and Forecasts. He also hosts Markets and Money Podcast. Originally graduating with a degree in Communications, Callum decided financial markets were far more fascinating than anything Marshall McLuhan (the ‘medium is the message’) ever came up with. Today Callum spends his day reading and researching why currencies, commodities and stocks move like they do. So far he’s discovered it’s often in a way you least expect. To have Callum’s thoughts and insights on the current state of the currency, commodities and stock markets delivered straight to your inbox, take out a free subscription to Markets and Money here.

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