What’s happened to Melbourne’s ghost suburbs? Investors look to cash out, causing rental market pain

New research from Prosper Australia shows 97,861 could have done more to address the city’s housing crisis, about 5.2 per cent of the city’s total housing market, last year.

It’s the lowest figure since 2021 — but is still almost 30,000 above numbers recorded in 2019.

The report shows that vacancy rates rose during the pandemic from a low-water mark in 2019 when fewer than 70,000 residences were deemed vacant or underused.

As Melbourne was becoming the world’s most locked down city in 2021, their research shows more than 105,000 homes were vacant.

Separate figures from the Census, also conducted in August 2021, showed up to 75 per cent of homes in some suburbs around Victoria were empty at the time.

As many as 30 per cent of inner city homes were also left empty, while area’s from Footscray to St Kilda had one in five homes sitting empty.

Prosper’s research indicates that before the pandemic vacant homes were most common in the council areas of Whitehorse, Darebin, Boroondara, Monash and Moreland.

Today, the highest levels are in the municipalities of Melbourne, with 10.2 per cent of homes underused or vacant, Whitehorse, 6 per cent, Boroondara, 5.9 per cent and Merri-Bek, 5.9 per cent.

There are an estimated 98,000 empty homes around Melbourne.

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The Prosper Australia research classifies a home as underused if it had less than 50 litres of water use a day, and vacant if it had 0 litres.

The firm’s research and policy director Dr Tim Helm said about 27,000 homes across metropolitan Melbourne were left completely vacant, or about 1.5 per cent of all dwellings.

By adding the underused homes to the list to reach close to 100,000, there were enough homes at least semi-vacant that it would take almost two years of construction to equal them — and that the entire Victorian public housing waitlist could be covered twice over as a result.

“It is a shocking waste that so many homes are left empty during a rental crisis, and it speaks to the state of inequality that these numbers keep rising,” Dr Helm said.

However, the researcher noted that while addressing empty homes was important, the choice by developers to land bank properties and leave potential housing sites sitting undeveloped had been ignored or downplayed to the detriment of tenants and homebuyers.

Water use can be used to determine how much time people are spending in homes — or if they are sitting empty.

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“We also need the government to commit to stronger ongoing monitoring, public vacancy statistics, and rigorous evaluation of whether the revamped vacancy tax is delivering as promised,” Dr Helm said.

The latest Census figures collected three years ago found anywhere from 24-31 per cent of units across Melbourne’s CBD, Docklands and Southbank were sitting empty.

Barry Plant Yarra’s Edge branch manager Geoff White estimated the figure today was closer to 10-15 per cent, in line with Prosper’s research, and most of those would be homes that were for sale or that were about to be listed.

“The real number of properties vacant would be quite a bit lower now,” Mr White said.

“I’d be surprised now if it was up above 10 or 15 per cent, we just aren’t seeing it as agents.”

801/1 Balston St, Southbank, is being sold by an investor cashing out of the market.

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The agent said beyond normal holding costs, apartment owners were also being hit with higher owners corporation fees that had forced many once empty residences onto the rental market.

“Empty homes would now be isolated to a number of newer buildings that have just been completed where there’s higher ownership from overseas buyers who are looking to move it on,” Mr White said.

“And with current tenant legislation, it’s far easier to sell a vacant home than a tenanted one.”

He added that investors were now a “worryingly” small chunk of buyers across Melbourne’s CBD and surrounds, with first-home buyer numbers higher.

PropTrack economist Paul Ryan agreed it was likely urban areas like Melbourne’s CBD and Docklands had shifted to having more homes tenanted, or being lived in by an owner buyer, since the last Census data was recorded.

Mr Ryan said while wider Melbourne’s unit vacancy rate had reached as high as 12 per cent at the height of pandemic-era, latest figures showed it was currently 2.4 per cent.

1401/60 Lorimer St, Docklands, is also being sold by an investor who has it staged – but vacant as they await a new buyer.

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Housevacancieswere even lower at 1.1 per cent, in part because more renters are opting for sharehouses to cut back on accommodation costs.

“A lot of people today are being asked to pay $100 a week more, and the fact that they know the vacancy rate is so low means tenants will just pay it rather than chance searching for another,” Mr Ryan said.

“But we absolutely need to see rental vacancy rates increase to 3 per cent to see better conditions for renters.”

With some of the homes identified as vacant or underused by Prosper also part of the city’s rental vacancy rate, even more will have to be built and remain empty for the housing crisis and rental affordability to improve.

In 2021, more than one in five residences in urban suburbs from Footscray and West Melbourne to South Yarra and St Kilda were unoccupied in 2021.

McGrath St Kilda’s Michael Townsend said those figures had been buoyed by short-stay accommodation and even serviced apartments.

Mr Townsend said most of those owners had since sold their investments, or converted them to long-term rentals, after watching them sit empty across much of 2021.

Today, he said there was a rise in new investors looking at listing homes as short-term rentals to cash in on high demand around the Grand Prix and other major events — though they were still a small number.

9/7 Alfred Square, St Kilda, is for sale at $459,000 but was last listed for rent in 2022.

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“It is definitely possible we will see more homes coming back to that short term stay market,” Mr Townsend said. “But they will be newer investors.”

He estimated there would be closer to one in 20 homes sitting empty today, about 5 per cent, and most of them would be for sale or being prepared for sale.

As Melbourne was grappling with its final lockdowns, almost one in five Toorak homes were sitting empty.

Today, RT Edgar Toorak managing director Jeremy Fox said areas like Toorak and South Yarra would be better described as having homes that were “underused”.

In many cases those that were vacant were ex rentals being sold off by landlords unimpressed by land tax law changes.

2/705 Orrong Road, Toorak, is for sale at $1.7m, but was last listed for rent in 2020.

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“A lot of the international buyers come to Australia and Melbourne as a fantastic place to live and educate their children, but they have businesses everywhere — from London to Beijing,” Mr Fox said.

“The homes all have furniture in them, the owners just travel a lot. I never see a truly vacant property unless it’s being renovated.”

But the highest numbers of vacant homes are likely to be in areas with big numbers of holiday homes.

MANY HOLIDAY HOMES REMAIN VACANT, BUT SELL UP IS ON

Venus Bay near Phillip Island and Portsea on the Mornington Peninsula are the areas with the highest number of homes vacant at the last census, with about 75 per cent of homes sitting empty on the day.

But PBE Real Estate Venus Bay’s Colleen Reeves noted it was quite probable that with a lockdown in place at the time of the last Census, many people who fled Melbourne to their holiday home would have lied and said they were at their suburban home.

Ms Reeves added that the pandemic had also changed the way people used their getaways in the area, and many owners were now “part time” residents of Venus Bay who came down on Thursday night and worked from their holiday home on Friday and Monday.

56-58 Anita Crescent, Venus Bay, is for sale at $650,000 and could be a ‘part time’ residence for a Melburnian looking to escape the big smoke four days a week.

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“There are not as many homes unoccupied as there were — we would think there are now a few hundred part timers,” she said.

Mr Fox noted that for Portsea, land tax changes had forced a number of sales and was changing the fabric of the town as only the “very wealthy” could afford to hang onto beach homes.

He added that the tax tweak had inadvertently become “discriminatory”, as while married couples could not own separate residences — couples who hadn’t tied the knot could each own a property, making it easier for them to retain multiple homes.

“It’s highly discriminatory to have husband and wives only being able to own one house, but unmarried partners being able to own one each,” Mr Fox said.

Mr Ryan said that filling empty homes wasn’t necessarily a significant solution to the housing crisis as while it might provide a “small uptick in housing availability” it was a “one-time thing”.

“Building more homes and encouraging empty nesters to downsize are the two big things that would move the needle the most,” Mr Ryan said.