House prices are set to recover once interest rates stop rising and some new immigrants opt to buy homes, as the influx fuels a rental crisis, experts say.
Australia’s net annual immigration in the year up to September 2022 stood at 303,700 people – a 15-year high – taking the overall population above 26.1 million.
This was the biggest overseas increase since late 2008, and includes skilled migrants, family reunions and international students.
The number of immigrants was also significantly higher than the October budget forecast of 180,000 for 2022-23, and the 235,000 level projected for 2024-25.
Tim Lawless, head of research with real estate data group CoreLogic, said higher immigration was likely to help housing values recover once the Reserve Bank of Australia stopped raising interest rates.
An overall population growth of 1.6 per cent was back to pre-pandemic levels, new Australian Bureau of Statistics data showed.
By comparison, New Zealand’s population grew by just 0.2 per cent during the same time frame while the U.S. population last year increased by 0.4 per cent, with an expert blaming a surge in international students for Australia’s rental crisis.
House prices are set to recover once interest rates stop rising as Australia posts some of the world’s strongest population growth with immigration hitting record levels, experts say (pictured is an auction in the Sydney suburb of Strathfield)
Mr Lawless explained that despite the issues an influx of immigrants could be causing, it may also help house prices recover as new migrants look to buy instead of entering the tough rental market.
‘The surge in permanent and long-term migrants could be another factor supporting the stronger market conditions,’ he said.
‘While most of the housing demand from overseas migration is likely to flow into the rental market, with vacancy rates so tight, we may be seeing a higher than normal portion of long-term or permanent migrants choosing to buy rather than rent.’
Westpac is now expecting the Reserve Bank of Australia to pause rate rises in April.
The bank’s chief economist Bill Evans is forecasting a 3.85 per cent cash rate in May, instead of a 4.1 per cent rate as financial market concerns worry the RBA.
‘The major change since the March RBA board meeting has been the adverse developments in global markets,’ he said.
Bob Birrell, the president of The Australian Population and Research Institute, said higher numbers of international students had caused the surge in Australia’s net annual immigration level, and was the major cause of a rental crisis in Sydney and Melbourne, in particular.
Australia’s net annual immigration pace in September 2022 stood at 303,700 – a 15-year high – taking the overall population above 26.1million
‘Just over 50 per cent of that migration in Australia ends up in Sydney and Melbourne, and they are going to be requiring rental accommodation,’ he told Daily Mail Australia.
‘That’s a crucial factor in the rental crisis at the moment.
‘The Labor government is caught here: it’s expressing concern for the wellbeing of young Australians seeking rental accommodation but at the same time it’s adding a huge load to the demand for that scarce accommodation.’
The Sydney suburb of Randwick, near the University of New South Wales, has an ultra-low rental vacancy rate of just 0.8 per cent, SQM Research data showed.
Commonwealth Bank senior economist Belinda Allen said Australia’s population growth was back to pre-pandemic levels, with net immigration growing by 106,000 over July, August and September last year – setting a new quarterly record.
‘Given the flow of net long-term and permanent overseas arrivals, we are not a surprised to see a record lift of net overseas migration,’ he said.
Bob Birrell, the president of The Australian Population and Research Institute, said higher numbers of international students caused the surge in Australia’s net annual immigration level, and was the major cause of a rental crisis in Sydney (Randwick queue pictured) and Melbourne in particular
Immigration was the key source of Australia’s population growth, because the birth rate fell and Covid deaths rose.
The net overseas migration figure of 303,700 was based on 536,900 permanent overseas migration arrivals minus 233,200 permanent departures.
Australia’s strong 1.6 per cent population growth pace occurred even though the natural increase – or births minus deaths – was 18.1 per cent weaker than the previous year.
Sydney’s property market is already benefiting from higher immigration with the median house price in February rising by 0.3 per cent, despite the Reserve Bank during that month raising the cash rate for a ninth consecutive month.
But prices are still 14.7 per cent weaker compared with a year earlier when the cash rate was still at a record-low of 0.1 per cent, with the median house value still expensive at $1,217,308.
Australia’s immigration growth pace of 1.6 per cent dwarfed New Zealand’s 0.2 per cent pace and the U.S. level of 0.4 per cent (pictured is an overcrowded Sydney train)
The RBA raised the cash rate again for the tenth time in March, taking it up to an 11-year high of 3.6 per cent.
Despite that, Sydney’s property values in the first half of March were 0.5 per cent higher, while Melbourne and Perth values rose 0.2 per cent.
Queensland had Australia’s strongest population growth pace of 2.2 per cent, with 114,400 new residents moving there, including many from other states seeking better weather.
By comparison, 108,700 people moved to New South Wales which had a growth pace of 1.3 per cent, as high overseas immigration coincided with existing residents moving to other states.
Victoria attracted a similar number, or 108,400 new residents, but it had a higher 1.7 per cent growth pace.
Western Australia also had an above-average growth pace, with a population increase of 1.8 per cent as 50,400 people moved there.
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