Over the last couple of months I’ve been talking about the impact of Australia’s record migration levels on the housing and rental markets.
This week I received a fascinating report from CoreLogic’s Head of Research, Eliza Owen, who had five key insights about overseas migration and the housing market:
1. Migrant housing demand skews toward the rental market
Around 60 per cent of permanent migrants and 70 per cent of temporary migrants are renters in the short term. Home ownership for permanent migrants is higher the longer they are in the country. Home ownership rates are over 70 per cent for permanent migrants who arrived in Australia before 2012.
2. Net overseas migration is at record highs, but partly because it was temporarily restricted
Without the temporary migration restrictions between March 2020 and July 2022, net overseas migration would be much lower over the latest reporting period. Part of the reason net overseas migration is so high right now, is because departures are low (because fewer temporary migrants arrived through COVID), and arrivals represent new and postponed moves to Australia. If it weren’t for COVID, we still would have had more overseas arrivals in the past few years than what we’ve seen since March 2020.
3. Temporary migration ban made the rental market volatile
COVID taught us that temporary caps on migration are not a good idea. They create extreme fluctuations in overseas migration, which in turn has put a lot of pressure on some rental markets. Investor interest may also drop off in these markets when the migration tap is turned off, worsening the demand shock when temporary caps are lifted.
4. Migration is not the only demand-side factor pushing up housing costs
Lower household sizes, an ageing population and lower rates of marriage have meant that even if there was no change in Australia’s population, demand for housing is going to rise. Rental market pressures have also increased from a long-term decline in social housing as a part of Australian dwelling stock. Even though international border restrictions were in play between March 2020 and July 2022, rents rose 16.4 per cent nationally.
5. Reducing the migration intake would have trade-offs
Creating a net overseas migration target can help Australia plan out housing supply, but overseas migration also helps to grow the economy, and grow economic capacity. Migration is also being looked at to help with the housing crisis, by targeting migrants skilled in construction.
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