Home prices will recover once interest rates stop rising and some new immigrants choose to buy homes as the influx fuels a rental crisis, experts say.
Australia’s net annual immigration in the year to September 2022 was 303,700 people – a 15-year record – bringing the total population above 26.1 million.
This was the largest increase abroad since late 2008 and includes skilled migrants, family reunions and international students.
The number of immigrants was also significantly higher than the October budget forecast of 180,000 for 2022-23 and the projected level of 235,000 for 2024-25.
Tim Lawless, head of research at property data group CoreLogic, said higher immigration is likely to help house prices recover once the Reserve Bank of Australia stopped raising interest rates.
An overall population growth rate of 1.6 percent was back to pre-pandemic levels, new data from the Australian Bureau of Statistics showed.
By comparison, New Zealand’s population grew just 0.2 percent over the same period, while the US population grew 0.4 percent last year.
House prices will recover once interest rates stop rising as Australia shows some of the strongest population growth in the world and immigration hits record levels, experts say (pictured is an auction in Sydney suburb Strathfield)
Australia’s population growth is among the fastest in the world
Australia’s population growth rate of 1.6 percent in the year to September was significantly higher than New Zealand’s 0.2 percent growth rate and the United States’ 0.4 percent increase.
The net annual immigration rate of 303,700 was above the 180,000 predicted in the October budget and the 235,000 projected for 2024-2025.
Mr Lawless explained that despite the problems an influx of immigrants can cause, it can also help restore house prices if new migrants want to buy rather than enter the difficult rental market.
“The increase in permanent and long-term migrants could be another factor supporting stronger market conditions,” he said.
“While most of the demand for housing from overseas migration is likely to flow into the rental market, with vacancy rates so tight, we may see a higher-than-normal share of long-term or permanent migrants choosing to buy rather than rent. ‘
Westpac now expects the Reserve Bank of Australia to pause rate hikes in April.
The bank’s chief economist, Bill Evans, is forecasting a cash rate of 3.85 percent in May, instead of a rate of 4.1 percent, as the RBA worries about financial markets.
“The most significant change since the RBA board meeting in March has been the unfavorable developments in global markets,” he said.
Bob Birrell, the president of The Australian Population and Research Institute, said a higher number of international students was to blame for the increase in Australia’s net annual immigration level, and was the main cause of a rent crisis in Sydney and Melbourne in particular.
Australia’s net annual immigration rate in September 2022 was 303,700 – a 15-year record – bringing the total population above 26.1 million
“Just over 50 per cent of that migration in Australia will end up in Sydney and Melbourne, and they will need rental housing,” he told Daily Mail Australia.
‘That is a crucial factor in the current rental crisis.
“The Labor government is trapped here: it expresses concern for the well-being of young Australians looking for rental accommodation, but at the same time it is putting enormous pressure on the demand for that scarce living space.”
The Sydney suburb of Randwick, near the University of New South Wales, has a very low rental vacancy rate of just 0.8 percent, data from SQM Research showed.
Commonwealth Bank senior economist Belinda Allen said Australia’s population growth had returned to pre-pandemic levels, with net immigration rising by 106,000 in July, August and September last year – a new quarterly record.
“Given the flow of net long-term and permanent overseas arrivals, we are not surprised to see a record increase in net overseas migration,” he said.
Bob Birrell, the president of The Australian Population and Research Institute, said a higher number of international students drove the increase in Australia’s annual net immigration level and was the main cause of a rental crisis in Sydney (Randwick row pictured) and Melbourne in particular
Immigration has been the main source of Australia’s population growth as birth rates fell and Covid deaths rose.
The net overseas migration figure of 303,700 was based on 536,900 permanent arrivals of foreign migration minus 233,200 permanent departures.
Australia’s strong 1.6 per cent population growth occurred even though the natural increase – or births minus deaths – was 18.1 per cent weaker than the previous year.
Sydney’s property market is already benefiting from higher immigration, with the median house price rising 0.3 percent in February, despite the Reserve Bank raising cash rates for the ninth consecutive month that month.
But prices are still down 14.7 percent from a year earlier, when the cash rate was still at a record low of 0.1 percent, while the median home value was still expensive at $1,217,308.
Australia’s immigration growth rate of 1.6 percent dwarfed New Zealand’s growth rate of 0.2 percent and the US level of 0.4 percent (pictured is an overcrowded train in Sydney)
The RBA raised cash rates again in March for the tenth time, taking it to an 11-year high of 3.6 percent.
Despite this, property values in Sydney were up 0.5 percent in the first half of March, while values in Melbourne and Perth rose 0.2 percent.
Queensland had Australia’s strongest population growth rate of 2.2 percent, with 114,400 new residents moving there, including many from other states seeking better weather.
In comparison, 108,700 people moved to New South Wales, which had a growth rate of 1.3 percent as high overseas immigration coincided with the relocation of existing residents to other states.
Victoria attracted a similar number, or 108,400 new residents, but had a higher growth rate of 1.7 percent.
Western Australia also had an above-average growth rate, with a population increase of 1.8 percent as 50,400 people moved there.
Australia’s growth by state and territory in the year to September
QUEENSLAND: 2.2 percent or 114,400 people increased to 5,354,800
WESTERN AUSTRALIA: 1.8 percent or 50,400 people increased to 2,805,000
VICTORIA: 1.7 percent or 108,400 people increased to 6,656,300
SOUTH AUSTRALIA: 1.4 percent or 25,200 people increased to 1,828,700
AUSTRALIAN CAPITAL TERRITORY: An increase of 1.4 percent or 6,300 people to 459,000
NEW SOUTH WALES: 1.3 percent or 108,700 people increased to 8,193,500
TASMANIA: An increase of 0.7 percent or 4,100 people to 571,900
NORTHERN TERRITORY: An increase of 0.4 percent or 900 people to 250,600
AUSTRALIA: 1.6 percent or 418,500 people increased to 26,124,800
Source: Australian Bureau of Statistics