A while back we examined an apparent trend in Melbourne’s burgeoning new apartment market, which saw foreign buyers keeping completed units out of the rental accommodation pipeline.
The seventh annual Speculative Vacancies study, commissioned by tax reform group Prosper Australia, revealed that in 2014, around 65,000 out of 1.5 million Docklands precinct apartments seemed devoid of human life.
And because they’ve never been listed on the open market, these empty dwellings are not represented in official vacancy rates.
At the time, Hong Kong housing markets were experiencing similar issues, largely due to Chinese investors looking for somewhere to park their money, and in turn hoarding swathes of new apartment stock as it saturated inner city neighbourhoods.
What’s interesting though, is that we continue to hear of accommodation shortages, with numerous experts insisting that the current apartment oversupplies across our largest cities will easily be taken up within the next five or so years…if that.
But are they accounting for this empty house syndrome?
The most recent 2015 Speculative Vacancies study from Prosper Australia revealed that up to 18.9 per cent of all investor owned property was sitting vacant in Melbourne, with 4.8 per cent of Melbourne’s total housing stock vacant in 2014.
Based on analysis of abnormally low water consumption, the speculative vacancy rate has risen by 28 per cent for properties using less than 50 litres of water per day since 2013.
“According to our most conservative measure,” says Prosper Australia’s project director Karl Fitzgerald, “Those using zero litres of water increased by a concerning 70%.”
Fitzgerald says that over eight years, house hoarding for profit is “magnified in periods of increased speculation.”
“Policy makers have genuinely transformed our housing supply. We have more than enough housing. The challenge is to address the disconnect between supply and occupancy. When there are three times as many empty houses as there are homeless people, we know the policy focus is just wrong.”
Interestingly, this isn’t something the Australian mainstream media or indeed, government policymakers at any level, have wanted to discuss at length in an open public forum. You’d think it would be pretty big news in the wake of ongoing talk around accommodation shortages and affordability issues, right?
But no…this alleged rise in speculative vacancies has largely gone unmentioned anywhere really.
In London however, the Mayor himself, Sadiq Khan is about to launch the UK’s most comprehensive inquiry into the impact of foreign investment flooding the local housing market.
Khan spoke of “real concerns” about the surge in numbers of homes being snapped up by overseas buyers.
“It’s clear we need to better understand the different roles that overseas money plays in London’s housing market, the scale of what’s going on, and what action can be taken to support development and help Londoners find a home,” Khan recently told The Guardian.
Much like we’ve seen in Melbourne and Sydney, it was recently revealed by The Guardian that a 50-storey block of 214 luxury apartments near the river Thames, is 60 per cent foreign owned.
But wait, there’s more…a quarter of the flats were held by companies in secretive offshore tax havens, and many were…big reveal…unoccupied!
Experts in China predict that a new wave of middle class investors from Mainland China will see the annual flow of foreign dollars into overseas property markets (including the UK and Australia), quadruple to $200 billion in the next ten years.
According to property agents Knight Frank, our Chinese neighbours are the largest consumers of new residential accommodation globally, closely followed by Singaporeans.
A different perspective
Director of Savill’s world research department Yolande Barnes, says foreign buyers only account for 7 per cent of property purchased across Greater London and as such, shouldn’t be vilified as the primary cause of any alleged “housing crisis”.
She says foreign buyers are “one element in an incredibly complicated picture. Without them investing in properties at the top end, we would not have been able to fund very much social or affordable housing since the financial crash.”
Barnes claims the real issue, much like here at home, is with the price and scarcity of developable land available in the city. The same lament can be heard across the ocean, where many Chinese buyers want to be a part of it…
New York, New York
Over the past decade or so, residential towers on the same mammoth scale as the Empire State Building have transformed the New York City skyline.
Costing more than a cool $US1 billion each to erect, the 95 storey buildings incorporate huge living spaces, and in their prime commanded price tags up to $100 million a piece.
Here’s the kicker…many are virtually empty!
A 2015 New York Times series revealed that a large number of the apartments were owned by holding companies, designed to overshadow the true identities of investors. And where did the money trail lead? Why, to Russia, Malaysia and of course, China, to name a few places of foreign buyer origin.
It’s widely accepted that the primary function of these monolithic apartment buildings is to serve as a safe haven for overseas investment capital, rather than accommodation for New York residents.
With an apparent growing number of ‘murky’ transactions involving foreign buyers now occurring throughout many of the world’s larger city property markets, where it will all lead is anyone’s guess.
But one thing is certain…there are far more elements to the so-called ‘accommodation shortage’ here at home than meets the eye.
More questions need answers and transparent dialogue must occur if we’re to ensure the influx of foreign investment that’s helped us survive some rather rocky financial transitions, doesn’t ultimately become our undoing.