Undersupply or Oversupply? The Hidden Property Statistics That Reveal the Truth

Undersupply or Oversupply? The Hidden Property Statistics That Reveal the Truth

The MSM is full of stories of desperate families unable to secure rental accommodation.

Take this one from QLD:

In March, single mum-of-three Kaylie Aitken told news.com.au she had been told the lease for her townhouse in Griffin, Queensland, would end with six weeks notice.

Two weeks later, she had racked up more than 20 rejected rental applications, and was making emergency plans to cram her children into her mother’s granny flat or stay with friends…

…last month, a young family documented their experience living in a tent with a baby and a toddler after their landlord decided to sell their home, and finding they had been priced out of the regional town they lived in.

The thing is, what seems to be a shortage, with pressure coming from the property lobby to ‘increase supply now’, ignores one vital fact…

We have plenty of supply.

There are tens of thousands of properties sitting vacant.

Just not for sale or rent.

Turns out QLD authorities have been following our lead over at Prosper Australia and using water data as a proxy to identify these vacant dwellings.

A whopping 19,500 homes across lower South East Queensland have water connected, but usage is so low that it seems no one’s been living there for months!

Additionally, the latest Census 2021 data shows that 9.6% of Australian properties are currently vacant.

That’s 1,043,776 homes!

We’ve been conducting studies into long-term vacant dwellings using water data as a proxy for more than 10 years at Prosper Australia.

Having penned a few of the ‘Speculative Vacancy’ reports, I can tell you that historically long-term vacancies will sit hidden from view until a crisis hits.

The number of ‘speculative vacancies’ rises in the bull phases of the property cycle.

This is when capital gains are accelerating, and yields are being squashed as a consequence.

Owners may have a plethora of reasons to hold their homes vacant.

But whilst prices are rising, let’s face it, there’s an extra incentive to chase capital gains over rental yields and avoid dealing with long-term tenancy issues and potentially expensive changes in state legislation.

This is why we call them speculative vacancies.

They’re being held in lieu of speculative gains.

The outcome, however, doesn’t change.

When we get to the end of the cycle, and owners need to bail for financial reasons, the MSM story will change from an acute shortage of undersupply to horrors of an oversupply.

The rental crisis could get much worse too.

Temporary visa holders declined by more than 750,000 through the pandemic.

Down from 2.41 million at the end of 2019 to 1.64 million by the third quarter of 2021.

The latest data shows a strong rebound of a quarter of million by May 2022:


Fat Tail Investment Research

Source: Australian Government data

[Click to open in a new window]

No doubt a significant proportion will be looking for rental accommodation during their stay.

Authorities are going to be under increasing pressure to implement reforms.

Note that authorities in the worse affected states with rocketing rents may implement a vacancy tax.

Victoria did this just a few years ago.

However, it’s notoriously difficult to regulate, and relies predominately on self-reporting.

Notably, it hasn’t made a substantial impact to the vacancy trends as Prosper Australia’s latest ‘Speculative Vacancy’ report proves.

To shift the market from a speculative one to one that works for need, not greed, requires sweeping tax reform.

Tinkering around the edges with vacancy taxes, first homebuyer grants, stamp duty to land tax changes, and so forth — cannot shift things substantially.

In another 10 years, journos will still be writing about the same old woes of housing unaffordability.

Latest census data shows the number of people owning their homes outright has dropped from 41.6% in 1996 to 31% in 2021.

So, if you’re not renting from a private landlord, you’re likely renting from the bank.

Still, as renegade economist Michael Hudson quips, ‘rent that used to be paid to landlords is now paid to the banks as interest’.

This is why we have a boom/bust property cycle, and voters that have skin in the game don’t want to do anything to stop the gravy train.

It reminds me of a comment by Former Prime Minister Tony Abbott in 2015 (when the Sydney market rocketed some 15%-plus upwards in a year).

As someone who, along with the bank, owns a house in Sydney I do hope our housing prices are increasing…

I want housing to be affordable but nevertheless, I also want house prices to be modestly increasing.

Indeed, there is nothing new under the Sun.

Sincerely,


Catherine Cashmore Signature

Catherine Cashmore,
Editor, The Daily Reckoning Australia