An immigration surge is underway, with housing demand to boost says Homely
Temporary visas for students and workers wanting to come to Australia have rebounded at their fastest-ever rate – up by more than 750,000 – from 1.6 million back to pre-pandemic highs of 2.4 million.
Based on the ABS population clock, Australia is currently experiencing an overall total population increase of one person every 1 minute and 2 seconds. With a surge in online real estate searches from overseas countries too, it’s clear that the ever-growing population is driving the Australian property market forward in 2023.
“We are advising our clients that now may be the time to get back into real estate as a savvy investment as Melbourne is now the top Australian city searched from India, the UK, China, Hong Kong and Singapore,” says Matt Scafidi of Abode Advocacy.
From 29 Dec 2022, the Australia-India Economic Cooperation and Trade Agreement (ECTA) began delivering new market access opportunities for Australian businesses and consumers.
At the time of writing, the Ministry of Education informed Chinese students that they can no longer complete their degrees online, and approximately 40,000 students are rushing back to Australia for the start of the on-campus February term.
What this means for property
CBD areas that suffered the most during lockdowns will benefit from an increase in immigration. In turn, there is likely to be a corresponding increase in demand for housing, goods, and services leading to a boost in the local economy and an increase in the value of property in these suburbs.
Sunny Gill, from Regent Estate Agents says, “I believe the property market is still holding well in the family-oriented suburbs. In addition, due to low stock levels in the market, there is not great competition with other comparable properties. The market in general has accepted the new interest rates as the norm and is now looking to transact. Both Regent Estate Agents offices in Point Cook and Balwyn North have seen higher activities in January.”
Given most new arrivals into Australia are renters, rental demand is set to surge in the already-tight Australian rental market. This trend reversal is providing plenty of opportunities for investors who can afford to buy as well as homeowners looking to sell.
As rents rise in the capital cities, there will be an indirect impact on property prices. This could encourage more first home buyers into the market, with Peter Wargent from BuyersBuyers adding, “Especially so in New South Wales, where the recent reform allows first homebuyers to pay no stamp duty in favour of an annual property tax.”
While it is an opportune time for investors to get back into the market, this year is a little trickier, says Wargent. “This isn’t being helped by the 3 percentage points lending assessment buffer – on top of rising product interest rates – introduced by APRA in October 2021, which makes it difficult for landlords to borrow.”
There are also plenty of overseas ‘remote’ buyers too. “Overseas buyers will need to either buy brand new property or vacant land where development is planned based on foreign investment restrictions,” says Scafidi of Abode Advocacy.
Sunny adds, “We are finding that as borders are finally opened, the new migrants coming to Australia will settle within 6–12 months and will look to purchase their first home, which will provide good activity in Q3 of 2023.”
“As we all know, property prices go through cycles and in the last 3 years Australia has seen 28.2% growth. So even if we have a 5–10% decline, overall we are still in a very strong position” he concludes.
But supply is strained – and government actions are polarising
“One thing is for certain that supply is already strained at the moment, as the building industry rallies to catch up from the backlog to meet increasing demand. This will see prices increase in this sector of the market for new construction and development over 2023-24 in our opinion and bring a long-awaited renaissance to Melbourne’s CBD & inner suburbs apartment market.” Matthew Scafidi says.
Put simply, the supply of dwellings is not responding to demand. This is particularly so for the residential rental market,” says Tim McKibbin, Chief Executive Officer of the Real Estate Institute of New South Wales. “We see politicians constantly increasing the rights of tenants and eroding the rights of landlords. Things like threatened rent freezes, removal of no grounds evictions, rent bidding and the tenant’s right to have a pet is driving investors out of the market. The irony of this increase in tenant’s rights, the biggest loser is tenants with less property and therefore greater competition and increased rents. Investors can move their money into other investment opportunities.”
So, what does this mean for you?
Pete’s tips for sellers
There are relatively few forced sellers at the moment, with unemployment at close to a 50-year low and rental vacancies for landlords at record lows. Many prospective vendors are choosing to wait out the downturn for better conditions ahead.
The property market recovery will likely be driven by Perth and Sydney, in particular in the lower price points in New South Wales below $1.5 million.
Pete’s tips for buyers
- Factor in that interest rates will likely still rise in the first few months of 2023.
- Be patient, look for bargains, and don’t overstretch.
Matt’s tips for investors
“For the first time in a long time getting involved in new good quality development construction is our advice to our investment clients who will have no issue attracting tenants and should see good appreciation at the same time.”
“It is important for investors, buyers, and sellers to understand that fast-growing group of consumers from India and engage culturally to have a positive impact on the economy in general. Regent Estate Agents have a diverse team with great cultural understanding, and we will be happy to assist anyone with how this will have a positive impact on the property market.”