This topic has got a lot of air over the past couple of weeks.
This post I want to cover two subjects, firstly unoccupied dwellings and secondly underutilised or spare bedrooms.
Four tables are at the end this post.
Let’s start with unoccupied dwellings.
According to the 2021 Census there are some one million unoccupied private dwellings across Australia. This equates to about 10% of Australia’s private residences.
According to the ABS an unoccupied private dwelling is a vacant one at the time of the census (usually around mid-August every fifth year) and the reason for the vacancy includes being a holiday home – for owner’s use or rented out commercially i.e., Airbnb; an investment property without a tenant; a newly built but vacant dwelling; a habitable dwelling being renovated and/or vacant dwelling for sale or lease.
This count excludes non-private dwellings such as hotels and motels, caravan and similar ‘housing’ estates, marinas, prisons, boarding schools, defence, and religious establishments plus other communal housing, such as aged care.
The occupancy for most Australian dwellings is determined by the census form.
Unoccupied dwellings are then followed up by field visits and other secondary indicators such as personal income taxation plus Medicare and social service datasets.
This census Smart-meter electricity data was used for the first time. This information is a strong indicator of dwelling occupancy. The ABS believes that the use of this information has significantly improved the accuracy of the dwelling occupancy count in 2021.
Now that we have got this out of the way, let’s review the findings.
Regardless of the recent headlines one million unoccupied dwellings is not new.
Table 1 shows that this has been the case for a long time across Australia.
In fact, the growth in unoccupied dwellings has slowed down between the last two census periods. This slowdown, for mine, is due to two factors – one, the improvement in the data, as outlined above and two, because to the Covid pandemic, which saw a lot more holiday homes being utilised.
On that note many have commentated that the reason for the high number of unoccupied homes is Airbnb’s.
Yet it is estimated that just 100,000 whole dwellings are listed for rent as an Airbnb across Australia. So, if there are 100,000 Airbnb listed dwellings and they were all vacant across Australia at the time (highly unlikely but let’s roll with the flow for now) then this accounts for 10% of unoccupied homes.
In addition, there are studies to suggest that one in every 100 Australian households hold a holiday home for their personal use. Assuming they were all vacant in August last year, then that would account for another 100,000 unoccupied homes.
It is obvious from table 2 that quite a few Australia’s unoccupied dwellings are in regional towns and tourist orientated locations.
But I think it is more reasonable to assume that some of these holiday homes were occupied in August last year. So, if say half of these homes were occupied, then combined there were some 50,000 unoccupied Airbnb’s and 50,000 unoccupied holiday homes for personal use last year.
If this is true, then ‘holiday’ homes account for 10% of the unoccupied dwellings in 2021.
It has also been mentioned that a lot of the reason for the unoccupied count is due to dwellings being sold or for lease. This accounts for some of the unoccupied stock, but not as much as some think.
There were 625,000 dwelling sales across Australia last year. If these sales, took on average, three months from initial listing to settlement – which given the heat in the housing market at the time, isn’t unrealistic – then some 150,000 dwellings or 15% could have been unoccupied due to the sales process.
Furthermore, there were some 60,000 vacant rental properties across the country in August last year, accounting for 6% of the unoccupied stock.
Our recent work suggests that that one in every 200th renovation is big enough to exclude occupation for a period of time. So, this means around 50,000 dwellings could be unoccupied, which represent another 5% of the total.
Therefore, in total ‘sales, for lease and renovations’ account for about 210,000 unoccupied dwellings or roughly 20%.
So, what makes up the 70% or 700,000 unoccupied dwellings?
It short these are investment properties that are locked up rather than tenanted.
Table 2 shows that many of the unoccupied dwellings are in our capital cities and especially in Sydney and Melbourne where more apartments are in the dwelling mix and the proportion of overseas buyers, especially from Asia, and particularly from China, is the highest in the country.
Consequently, and in summary, it is somewhat safe to say that something like 70% of the unoccupied dwellings across Australia are deliberately locked up.
Assuming past immigration levels return then there is a need to build some 150,000 new dwellings across Australia each year.
If we could unlock these 700,000 empty homes, we would not need to build a new home for 4.5 years.
Whilst that is fantasy land, any move that opens these locked up digs will go a long way to improving short-term dwelling supply.
Now let’s turn our attention to empty bedrooms.
Table 3 suggests that three quarters (77%) of our dwellings have one or more spare bedrooms.
Homeowners without a mortgage (who are usually older) have the most spare bedrooms (91%) whilst those renting have less. Yet some 74% of renters say they have at least one spare bedroom.
A bedroom in this case is one which is large enough to fit in a double sized bed and has a window and/or direct access to natural light. Typically, the room dimensions are at least 3 metres x 3 metres.
Table 4 shows that 84% of detached houses have a spare bedroom, whilst just half of Australia’s apartments have one or more underutilised bedroom.
Both tables indicate that some 13,600,000 bedrooms across Australia are unoccupied when it comes to someone sleeping in them on a regular basis.
If two people, on average, share one of these spare bedrooms – they could hold two single beds – then these underutilised bedrooms could house Australia’s entire population.
The increase in vacant dwellings and empty bedrooms is also a global trend.
The value of housing is no longer based on its social use.
Housing, in many western countries, has become a financial vehicle, and in markets where capital gains outweigh rental returns, homes are increasingly left vacant.
Australia has plenty of spare housing capacity.
We should be looking to implement some rules – both carrots and sticks – to better utilise what we have already got.
Harder economic times and a much slower real estate market will do some of this heavy lifting, but I think we need some new hard legislation to encourage investors to seek tenants. This is especially the case when it comes to overseas landlords.
A stiff ‘empty’ annual land tax could be applied.
I am thinking something like 2% for Australian owners and 10% or higher for foreigners.
I have advocating – No Passport, No Buy – for some time when it comes to private housing, but if we are going to continue to sell off the farm, then lets at least get tough regarding occupancy.
Private housing should be for shelter after all.
1. Two June play lists
You lucky peeps. Well maybe not. Sadly, more than a few told me that my May playlist was the best thing I have ever published.
Listen to my June playlists here.
2. A few seats remain
There are a few Master Class seats available for my next Brisbane workshop on Friday 14th October.
Go here to secure your seat/s.