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Around 16 per cent of investment properties in Melbourne could be empty, according to a new report by Prosper Australia.
Vacant properties indicate owners are leaving residential homes unused, without putting them on the rental market, or up for purchase.
The report analysed the water consumption of over a million properties in the city and found a total of 60,000 homes used little to no water in 2017. No water usage suggests no occupant.
Prosper Australia project director Karl Fitzgerald said vacancies are unethical and should not be encouraged.
"We grew up with this narrative that the harder you work the luckier you are, but now the economic system is rigged for landowners to buy and wait to make money," he said.
They are just holding an asset and waiting for it to develop over time.
The average house price in Melbourne is around $800,000 and there are over 24,000 homeless people in the city.
And as the housing market falls, Mr Fitzgerald said the number of vacancies and homeless people are likely to increase.
The Victorian government tried to address the issue in March 2017 by announcing a vacant residential property tax.
Property owners are taxed if homes are vacant for more than six months, at a rate of one percent of the property’s value.
The government said it introduced the measure as an incentive for landowners to make residential properties available for rent or purchase.
Melbourne remains the number one target for foreign investors in Australia, according to last years annual report by The Foreign Investment Review Board.
But Mr Fitzgerald said domestic investors are the majority.
“Excessive foreign investment should be addressed, but domestic investors remain the largest investors.”
Mr Fitzgerald said there should be further policy reforms to reduce the hoarding of vacant properties.