If you’re wondering why Australia’s record-breaking residential construction boom has done little to ease housing affordability in Australia’s largest cities, perhaps it’s because many of the homes built are currently unoccupied.

Kristina Clifton, economist at the Commonwealth Bank, explains:

There has been a lot of talk in the press about foreigners purchasing new apartments and then leaving them empty. The government is trying to deter this type of activity with a new vacancy tax for foreigners introduced in the latest Federal Budget in May. The Victorian Government is also introducing a similar tax. It’s been difficult to work out the extent to which this is happening. But the Census data tell us that the proportion of dwellings that are unoccupied increased by 0.5 percentage points (ppts) to 11.2% over the four years to 2016. The increase was 0.2 ppts larger than over the four years to the 2011 Census. Of the additional stock built over the four years to 2016, around 17% has been left unoccupied. One caveat however is that we don’t know the ownership split between domestic and foreigners owners for this unoccupied housing stock. But regardless of the ownership, new supply has had to increase at a faster rate than otherwise in order to keep up with demand.

Regardless of whether they were purchased by locals or foreign investors, close to one in five new dwellings built over that period was unoccupied on census night, according to the CBA’s analysis.

And, in absolute terms, over one million dwellings nationwide are currently unoccupied.

Along with an upward revision to population growth and an unchanged national average of 2.6 persons per dwelling, it suggests that underlying demand for housing is a little stronger than what many people were expecting, helping to explain why housing costs haven’t really responded in Australia’s largest centres.

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