Strategic observation

Interview: "Ghost apartment" owners should be taxed: expert

2017-07-17 14:03:46 (Beijing Time)         English.news.cn

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by Jessica Washington

SYDNEY, June 17 (Xinhua) -- Vacant properties are on the rise, according to a housing expert who said Australia needs to implement a tax on such properties before it's "wasteful housing" problem escalates.

Recent census data indicated that 11.2 percent of houses and apartments in Australia were recorded as "unoccupied", which accounts for more than 1 million properties.

Prof. Hal Pawson of the University of New South Wales told Xinhua on Monday that Sydney and Melbourne particular exemplify this troubling trend.

Pawson contended that in the current context of increasingly unaffordable rents, and rising homelessness in Australia, an excess of vacant housing is "wasteful housing", and a national tax is needed to combat inefficient use of "scarce housing resources".

"We need to recognize that housing is not being effectively used and find ways to deal with this, and although tax is a dreaded word, it can be used to address this problem at a national level," Pawson explained.

"Overvalued housing takes up a huge amount of resources and compromises the productivity of the economy, which puts a lot of people in debt and reduces their purchasing power."

When it comes to addressing Australia's housing bubble, the professor said the focus is misdirected toward only creating new housing supply, when the government should also consider how they can efficiently use properties that already exist, and provide a financial incentive for property owners to use their assets effectively.

Such a solution would make housing more "efficient and equitable", Pawson, who is also the Associate Director of the City Futures Research Centre, said, but there are further misconceptions about housing challenges in Australia that are preventing this solution from reaching the forefront of public discussion.

"Foreign investment is a hot button issue at the moment, and a lot of people confuse foreign investment and empty properties as being the same issue. While it's certainly part of the story, it does get exaggerated too much," Pawson said.

"The issue is much larger than foreign investor acquisition, and we cannot afford to get sidetracked by blaming foreign investors, and putting our focus on making foreign investment less attractive is not going to make this wasteful use of housing go away."

While debate about the state of housing in Australia continues to rage on, Pawson said some parties have become "early movers" on a vacancy levy, including the Victorian state government which introduced a tax on investors with properties that are empty for more than 6 months at a time.

The Vacant Residential Property Tax (VRPT) comes into effect from January 2018, and will apply an annual rate of 1 percent of the property's capital improved value, with some exemptions, including holiday homes, city units used for work purposes, properties in deceased estates, and more.

"There are a number of governments that are trying to tackle this, in Australia and internationally, and it's being recognized that a tax can be part of the solution," Pawson said.

One element of the problem is determining exactly how many empty homes there are in Australia, according to Pawson, who said while census figures can give a broad "snapshot" of the issue, some of these properties may be holiday homes or may have been temporarily unoccupied around the time of the 2016 census.

Although there is wider uncertainty about how many properties can actually be classified as vacant, Pawson said addressing this issue with a national tax would be a worthwhile endeavor, and play a small part in the broader effort to ease Australia's housing affordability problem.

"It's a huge cost to the government and society if the housing system doesn't work, and it's really low-income earners and renters who bear the brunt of this, paying more rent than they really need to," Pawson said.

"This is the status quo, there's many doing it tough and we need to recognise that and ease that burden."