New immigrants flooding into Australia aren’t putting pressure on the housing market or making property prices rise, according to a leading buyer’s agent.
Propertyology Head of Research, Simon Pressley, said economists were “naïve and ignorant” to think the surge in immigration had exacerbated the housing shortage and that a supply shortage was the main problem.
“Personally, it would not bother me in the slightest if the Federal Government put a complete freeze on overseas migration for a year or so,” he said.
“But that would not fix anything.”
Mr Pressley said immigrants only make up a small number of property transactions each year and that means they aren’t putting upward pressure on prices.
“Overseas migrants represent only 3 per cent of rent transactions and 7 per cent of real estate buyers,” Mr Pressley said.
“Therefore, 97 per cent and 93 per cent, respectively, of the competition to buy or to rent comes from Australia’s existing population, not the new arrivals.”
According to Mr Pressley, the annual average of 200,000 migrants creates demand for 60,000 extra homes, which is a “walk in the park” for a country adding and extra 160,000 each year.
“According to Census data, only 38 per cent of overseas migrants buy a home within five years of arriving in Australia (most of this will happen after year three),” he said.
“Sixty-two percent of migrants therefore rent for at least the first five years and 56 per cent of overseas migrants take up to 10 years to buy real estate.
“So they can’t be blamed for rising prices.”
Mr Pressley said the changing household needs of existing Australians was responsible for 93 per cent of the competition to buy real estate.
He said that during the Covid years, property prices still rose even when population numbers fell.
“People forget that we had two years of declining population while the international border was closed,” he said.
“Property values increased by 20 to 40 per cent during that period.
“Despite declining migration, rental supply still shrunk and rents soared.”
Mr Pressley said when the international border closed in January 2020, Sydney’s median house value was $993,000, then when it reopened two years later, it was 41 per cent higher ($1.4 million) and Sydney’s population had dropped 80,000.
“Over the 22 years ending March 2023, net overseas migration added just 8 per cent to Tasmania’s population, compared to adding 25 per cent to Victoria and 22 per cent to NSW,” he said.
“House values in their respective capital cities over the same period increased by 479 per cent, 274 per cent and 270 per cent.”
Mr Pressley said cities such as Hobart typically get lower volumes of year-on-year overseas migration, yet their housing capital growth rates have been significantly higher than Sydney and Melbourne over the past few years.
According to Mr Pressley, immigration wasn’t the main culprit in the rental market either.
He said of the 60,000 extra Australian households created by overseas migration each year, at least 38,000 require rental accommodation.
“While it is not uncommon for some tenants to move home every 6 to 12 months, the average timeframe for a tenant to move is around three years,” he said.
“Accordingly, of the 3.5 million rented homes across Australia, the existing tenant population generates approximately one million rental transactions per year.”
He said each year, hundreds of thousands of Australians in their late teens and early 20s move out of their parent’s home, thereby creating more demand for rental accommodation.
“Rental supply plays an important role in supporting our youth pursue independence,” Mr Pressley said.
“Meanwhile, the 50,000-plus divorces each year and countless domestic violence cases also create rental demand.
“An average of 100,000 households per year celebrate becoming first home buyers, thereby exiting the rental market.
He said 97 per cent of the pressure in rental markets is created by well-established Australian residents.
Mr Pressley said a collection of policies introduced from 2014 onwards, have consistently discouraged rental supply.
Several years of bad policy is the root cause of the rental crisis he said.
“The biggest concern is yet come,” he said.