Australia’s Housing Horizon: Migration’s Role in Shaping Demand - Property Inc

Australia’s Housing Horizon: Migration’s Role in Shaping Demand

Australia’s real estate market is currently experiencing significant shifts driven by historic levels of migration, according to recent reports analyzed by industry experts. Eliza Owen, head of research at CoreLogic, emphasizes that while migration is a hot topic in the context of housing affordability, it should not solely dictate strategic migration policy despite the immediate effects on the rental market. CoreLogic’s recent study indicates that a significant portion of migrants initially become renters, with home ownership rates increasing the longer migrants stay in the country.

Rhys Tarling’s article highlights how the closure and subsequent reopening of Australia’s borders have led to a record annual population growth of 2.17%, the highest since 2008, with net overseas migration contributing a significant number to this surge. This spike in migration has placed additional pressure on the housing market, with Owen estimating a demand for 182,000 new dwellings in a year where only 175,000 were completed. The volatility in the rental market has been exacerbated by factors such as rising interest rates and material costs, alongside labor shortages.

Emily Power, in her analysis, reports that foreign buyer activity in Australia’s new housing market is at a five-and-a-half-year high, especially in New South Wales, which has seen a substantial increase in the buying of new constructions by foreign purchasers. This is corroborated by the National Australia Bank’s Quarterly Australian Residential Property Survey for Q3 2023, which attributes this trend to migration and confidence in the market despite rising interest rates. The survey notes a significant uptick in foreign buyers’ market share for new homes, as well as an increase in activity in established property markets.

Moreover, Domain’s research points to migration as a key factor in the stability of vacancy rates at record lows, especially in major cities like Sydney and Melbourne. Dr. Nicola Powell of Domain notes that interstate and international migration has fueled the markets in these cities, with Melbourne seeing a substantial uptick in unit prices, outpacing Canberra due to the demand for more affordable housing options like apartments.

The situation presents a complex picture of Australia’s housing market, where migration plays a strategic role in shaping demand and supply. As Eliza Owen suggests, while temporary caps on migration could ease short-term pressures, they would introduce market volatility and could affect economic growth. A balanced approach that considers both the immediate impact on rental markets and the long-term implications for infrastructure and housing supply is essential for sustainable policy development in this sector.


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