Newcastle has double state average of vacant properties

THE number of unoccupied homes in Newcastle’s city centre is almost double the state average, but housing industry experts say calls for a tax on vacant properties are misguided because it would send the wrong message to investors.

Census data reveals that 18 per cent of the homes in the 2300 postcode, or about 1000 properties – were empty when the figures were collected in August last year, compared to 10 per cent across the rest of NSW.

While the accuracy of census data for full-time vacant properties is limited by the fact it’s based off the status of a property on census night the figures support a separate Fairfax Media analysis which found there were 100,000 underused houses across NSW and Victoria.

It comes as both the federal and Victorian state governments implement tax penalties for vacant properties amid concerns they help dry up supply and increase house prices and rental costs.

In May the Treasurer Scott Morrison announced charges for foreign investors who own properties that sit empty for six months or more in a year, and there have been calls in some sectors for a tax on vacant properties in NSW.

In March the Victorian Premier, Daniel Andrews, announced owners of empty homes would be taxed 1 per cent of the property's capital-improved value, a measure he said would send a strong message to owners who were “effectively banking an empty property and denying that to the market”.

But Craig Jennion, the executive director of the Housing Industry Association in the Hunter, questioned the accuracy of the Census figures and said taxation policies “send the wrong signal to potential investors in Australia”.

“More restrictive taxation policies, including plans to tax vacant homes, limit the share of foreign investment in new projects and increase foreign investor duties all send the wrong signal to potential investors in Australia,” he said.

“Barriers to investment are not productive for the building industry or the economy more broadly as they will have the effect of decreasing supply and potentially increasing rental costs further.

“Investment needs to be encouraged particularly when the investor side of the market has also been hit by tighter lending finance due to APRA’s recent restrictions on interest-only mortgages.”

The debate over vacant properties is often linked to rental stress because empty homes reduce supply, and according to the census, the number of households whose rent payments are more than 30 per cent of household income is 14 per cent in the Newcastle local government area. But the Grattan Institute’s John Daley says a vacant property tax could be hard to enforce and questioned its impact.