This article is from the Australian Property Journal archive
WHILE net overseas migration has hit record highs, overstating the impact migration levels have on the market risks overlooking the numerous other factors impacting Australia’s ongoing housing crisis.
According to CoreLogic, the picture around the housing crisis is far more complicated than just one issue, with the country facing high interest rates, low consumer sentiment and deteriorating housing affordability, seeing values and rents soaring and vacancy rates plummeting.
Over the year, national home values have surged by 7.2%, with rent values rose up 6.0%.
Migration is currently so high as a result of international border closures during the peaks of the COVID-19 global pandemic.
“Australia closed its borders to all non-citizens and non-residents in late March 2020, and fully re-opened to vaccinated and non-vaccinated arrivals in July 2022. By March 2023, Australia’s annual population growth hit 2.17%, the highest rate since 2008,” said Eliza Owen, head of research at CoreLogic.
“Net overseas migration, which is overseas arrivals minus departures, is currently at record highs annually, at 454,000 added to the population in the past 12 months. The pre-COVID decade average of annual net overseas migration is 217,000.”
Owen added that assuming an average household size of 2.49 people per dwelling in January 2023, the year to March would have seen demand for around 182,000 additional dwellings, in a year when around 175,000 dwellings were completed.
Which doesn’t consider new household formation domestically, which has increased significantly in recent years as average household side has dropped.
With the number of people per household early on in the pandemic pushing up dwelling demand by around 120,000 households, largely while border restrictions were in place.
“The high level of net overseas migration in the past year is partly a temporary result of the travel ban. It has been pushed higher by a concentrated number of overseas arrivals in a short space of time, and a 22% drop in departures compared to the historic five-year average,” added Owen.
“The decline in departures is explained by the ABS as a lagging result of fewer arrivals in recent years, which has translated to fewer departures a few years later. The record level of arrivals may in part be because of new, and postponed, decisions to come to Australia coalescing.”
Migration patterns to Australia indicated that without the ban during border closures, net overseas migration would likely be more in line with historic averages for the year to March 2023.
“Notably though, there has also still been fewer arrivals since COVID than we would have seen without travel restrictions,” said Owen.
“The strong spike in migration this year will normalise in time, and should not be an influence on long-term migration policies.”
Increases in overseas migration do have an immediate impact on the rental market, with 60.8% of migrant arrivals in the five years to 2021 renting, according to ABS data.
While in the longer term, home ownership rises among permanent migrants with 55.6% of arrivals between 2012 and 2016, and 70.6% of migrant arrivals before 2012 owning a home, according to 2021 data.
For temporary migrants 15 years and older, 68.9% were renters in 2021, including 91.6% of temporary skilled visa holders, and 83.5% of student visa holders.
While migration impacts housing demand, particularly in the rental market, a cap on migration would be a mere short-term solution.
Migration caps and bans throughout the height of the pandemic have already shown that such policies lead to long-term issues.
“Because housing demand (the movement of people) is more liquid than housing supply (the construction or acquisition of new housing), the re-opening of international borders created a demand shock, which quickly pushed up rents and worsened an already tight rental market,” added Owen.
“The demand shock also came amid constraints to new available supply, as sellers were put off by rising interest rates, and new home completions were delayed by increased material costs and labour shortages.”
Urban Taskforce CEO, Tom Forrest has also expressed concern of dog whistling by the NSW Opposition over migration levels and overstating the impact that current levels have on the crisis.
“The housing supply crisis did not simply appear last year – it has been a disaster that was brewing well before the outbreak of COVID. Housing supply is the answer, not killing economic growth by slashing immigration,” said Forrest.
