The World of Real Estate has been turned on its head as Melbourne has now been announced to have the highest Vacancy Rate of Any Major Australia City. This might not seem like newsworthy information, but let us unpack exactly what this means for Australia and the Real Estate market overall.
A high Vacancy rate is a huge deal for any city. It essentially means the number of properties that are available for new residents to live in. This could be anything from small-scale flats to luxury family homes.
A high vacancy rate could potentially be seen as a bad thing in a certain context. One reason for the sudden increase could be a mass evacuation of people from the city. Leaving properties empty and jobs vacant within the communities. This would often be a sign of a massive decrease in the quality of life of the area.
But, in the case of Melbourne the increase is due to a massive public works project designed to both help house those less fortunate while also building new homes to entice a new wave of immigration.
This scheme came about after a group of mortgage brokers in the city of Melbourne decided there weren’t enough people buying or selling properties in Melbourne to sustain long-term investments into any property.
Not to mention there was a lot of political unease due to the slow rise in homelessness and issues with housing. So, these mortgage brokers approached the city with a plan to create a few new residential zones in areas that were previously designated as industrial.
Melbourne has seen a massive decrease in its industrial exports. Most of its terrain is taken up by shops and residential zones, along with some fantastic natural parks. It was calculated that the loss of income the city would face due to the rezoning would be offset by the massive increase in funds they would receive once the residential homes were completed and more people started moving in.
Public opinion at first was skeptical of the idea. A lot of the citizens of Melbourne were worried about a new tidal wave of immigration, especially considering the slight job shortage that has been creeping up on Australia in recent years.
But their worries were soon eased after it was revealed just how many jobs this project would create within the city itself. The amount of construction that was taking place meant there was a need for a lot of hands-on labor. Thousands of jobs were created in this way.
And not just in construction either. Architects soon found themselves spoilt for choice on new jobs. Industrial supply firms, decorators, electricians, and engineers all had a hand in the project. Citizens of Melbourne had rallied behind the project one hundred percent.
As the project neared completion that was an unexpected complication. A few of the investors decided to withdraw their participation in the scheme and instead move their new properties into fully private estates.
This essentially took properties away from potential immigrants and lowered both the expected rise in population and the overall economic benefit that would have come from the property. It was soon discovered this private investor was planning to use the homes as vacation homes for him and his friends. This meant they would sit empty for most of the year, bringing no extra capital into the local economies.
This was followed by massive delays to construction as a lot of the firms had to deal with unexpected financial issues and supply issues due to imports being slowed down. A freak series of cyclones off the coast of china slowed down all shipping by a few months, putting the project behind schedule and well into the red in terms of overspend.
Eventually, construction finished and the new residential zones were opened. The impact on Melbourne as a city and the real estate market was seen almost instantly. The number of homeless citizens dropped by a significant amount within a month.
New council housing schemes were opened and nearly half the housing waitlist was given a home. Surprisingly the city didn’t see a rise in unemployment. The city was able to find enough jobs to successfully put to work all of the newly housed individuals.
The biggest shock came from the real estate side of things. The effect of all this vacant property is that property values as a whole are slowly decreasing. With more empty houses the market is having to compete with itself to stay afloat and, as such, is seeing house prices dip down.
This is a worrying trend that, if it doesn’t stabilize, could see the housing market in Melbourne crash entirely.