09.02.23
Australia’s immigration inflow has long been an important property market driver as net immigration represents a large portion of the country’s population growth. The pandemic changed that between March 2020 and November 2021 with an estimated 473,000 immigrants not arriving as planned. That’s a substantial impact. However, the situation has reversed since Australia’s borders reopened in late 2021.
In 2021/22, the net immigration number was 170,900 (ABS), representing 58% of Australia’s population growth that year. And according to the Government, this year’s net immigration figure is expected to be 235,000, in line with the pre-pandemic trend. So the critical question for property investors remain.
what does this rebound in net immigration mean for the property market’s outlook?
The good news is that Australian property prices are rather sensitive to immigration levels. A 2019 study by Moallemi and Melser showed an immigrant inflow of 1% of the population living in a particular postcode led to 0.9% higher property prices. So their research confirmed that rebounding net immigration numbers should contribute to higher property prices longer term. With most immigrants tending to move to cities along the east coast, these expected price impacts are likely to be most pronounced in Sydney, Melbourne, and Brisbane.
The current market, the pluses and the minuses
As with all market dynamics, context is important. The current market context is that there’s an ongoing rental crisis occurring in most Australian cities, reflecting an unusually low national rental property vacancy rate of 1.3%. This is important for property investors to understand. Given the vast majority of immigrants rent when they first arrive in Australia, the rebound in net immigration rates is likely to push an already tight rental market to become even tighter, which isn’t great news for Australian renters.
There are barely enough vacant rental properties to satisfy existing demand, never mind the additional demand from the rebound in net immigration. The likely longer-term impact of growing net immigration numbers combined with the rental crisis is that rents will continue to rise, forcing more people to try to buy. As a result, the positive impact of rebounding net immigration rates on property prices may be more extreme than in the past.
As Landen’s Director Rashed Panabig explains:
‘After an unusually low number of immigrants arriving in Australia throughout the pandemic, we’re expecting a return to business as usual from later this year. Property investors should be paying close attention to rising net immigration rates as they have the potential to help drive the market considerably higher in the coming years. It’s a structural trend that gives us confidence in the long term outlook for Australian property. And it’s one of the reasons we’re advising our clients to take advantage of the current property market weakness. The long term outlook for property remains bright.’
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