Experts predict that Australia’s housing prices will recover once interest rates stop rising, as some new immigrants may opt to buy homes instead of entering the tight rental market.
According to new data from the Australian Bureau of Statistics, Australia’s net annual immigration stood at 303,700 people in the year leading up to September 2022, which is the highest level in 15 years and takes the overall population above 26.1 million.
This was 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 is likely to help housing values recover once the Reserve Bank of Australia stops 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.
Despite the issues that 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 stronger market conditions.
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.
However, 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.
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, which is a crucial factor in the rental crisis at the moment.
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 raising the cash rate for a ninth consecutive month. 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 the issues, immigration is the key source of Australia’s population growth, as the birth rate fell and Covid deaths rose.
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.
Western Australia also had an above-average growth pace, with a population increase of 1.8 per cent as 50,400 people moved there.
Victoria attracted a similar number, or 108,400 new residents, but it had a higher 1.7 per cent growth pace.
New South Wales attracted 108,700 new residents, and its growth pace was 1.3 per cent, as high overseas immigration coincided with existing residents moving to other states.