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The Truth About Australian Housing And Overseas Migration

The Truth About Australian Housing And Overseas Migration
December 11, 2023 Propertyology Head of Research and REIA Hall of Famer, Simon Pressley

Indisputable evidence confirms that 97 percent of the pressure within Australian property markets is created by the existing population, not by overseas migration.

Despite the factually incorrect statements from various economists and other general gum-flappers, the evidence confirms that overseas migrants represent only 3 percent of rent transactions and 7 percent of real estate buyers.

Existing Australians (not new arrivals) are the ones driving competition to buy and to rent real estate.

This report is chock-full of never-seen-before facts, figures and intelligent insights regarding Australian real estate and overseas migration.


The good is greater than the grizzling

What usually gets lost in the emotion of moments like right now is the undeniable greater good which Australia enjoys from being arguably the most popular country in the world to migrate to.

More than half of Australia’s total current population are overseas migrants.

28 percent of those who live here were born overseas (first generation Australians) and a further 23 percent have parents who were born overseas (second generation Australians).

We are now 3-tenths of the way into the third century since the first official intake of overseas migration, when Captain Arthur Phillip and 859 British convicts arrived on the Great Southern Land.

Over the subsequent 235-years, various major events have shaped Australia’s migration history:

  • 165,000 convicts (80-years to 1868),
  • 400,000 Gold Rush ‘diggers’ (1852 to 1857),
  • 1,000,000+ 10-Pound Poms migrated under the post-war ‘Populate or Perish’ policy (1945 to 1972),
  • 100,000 migrants from 30 different countries built Australia’s biggest and most important infrastructure project, Snowy River Hydro (1949 to 1974),
  • former Prime Ministers Julia Gillard (Wales) and Tony Abbott (England),
  • oodles of migrants have made immense contributions to Australia in the fields of business, elite sport, food, fashion, the arts, medicine and technology. A few examples of famous second-generation Australians include Dawn Fraser (Scotland), Hugh Jackman (England), Andrew Bogut (Croatia), Shane Warne (Germany), Jamie Durie (Sri Lanka), Bing Lee (China) and John Hemmes (Holland),
  • 100,000’s of skilled workers helped Australia produce great wealth during multiple mining booms, and
  • Each year, overseas migration provides countless essential workers such as doctors, nurses, teachers, engineers, scientists, retail, hospitality and more.

There are currently nine (9) Australian municipalities where at least half the current population were born overseas.

They include Auburn in Sydney (62 percent), Dandenong in Melbourne (56 percent), Sunnybank in Brisbane (53 percent) and Canning in Perth (50 percent).

As with everything else related to property markets, the influence which overseas migration is grossly misunderstood by everyone from economists, governments and the broader property industry.

The 454,400 (net) overseas migrants over the last 12-months (to March 2023) is a record high.

That one big year is also balanced out by a net decline of 74,000 from April 2020 to December 2021, while the international border was closed, and Australia embarked on a housing construction boom.

For proper perspective, overseas migration added a (net) annual average of 200,000 people to the national population over the last decade.

That created demand for 60,000 extra homes – a walk in the park for a country which adds 160,000 (net) extra homes to the current 11.5 million housing stock per year.

ABS also confirms that most new overseas migrants have more people per household (3+) than the average Australian household (2.5 people).


Evidence regarding overseas migration impact

On face value, it seems logical that overseas migration is such a powerful force on housing values.

But the machinations of property markets is a very complicated ‘engine’ with more than 60 moving parts. Housing supply-and-demand is nowhere near as simple as people think.

Factors which have a significantly bigger influence than overseas migration include the strength of a city/town’s local economy, local confidence, credit policy, stamp duty, lifestyle trends, internal migration, rental legislation and the price of credit.

It seems appropriate to include Melbourne (along with Sydney) as Case Studies because they consistently attract Australia’s highest intake of overseas migration.

Using official data to plot overseas migration patterns since the turn of this century, we can see three (3) periods of very high migration (including this current period).

Melbourne’s median house value declined at stages in the midst of each of these periods of ‘high’ migration.

Conversely, Melbourne also experienced property booms at times when overseas migration was ‘mild’ (2000 to 2003) and ‘negative’ (2021).

Cities such as Hobart (and dozens of others) typically get below average overseas migration, yet their housing capital growth rates have been significantly higher than Australia’s Big 2 overseas migration magnets.

Over the 22-years ending March 2023, net overseas migration added just 8 percent to Tasmania’s population, compared to adding 25 percent to Victoria and 22 percent to New South Wales.

House values in their respective capital cities over the same period increased by 479 percent, 274 percent and 270 percent.

The next graphic takes an even broader look at some of Australia’s best-performed property markets over the last 5-years and the contribution that overseas migration made to their respective population growth over the same period.

There is no correlation.

How does overseas migration impact real estate?

The ‘true value’ of real estate only changes when ownership changes hands (a transaction occurs).

Real estate values rise when there are more buyers competing. 93 percent of buyers come from the existing population of a community, not from those who recently arrived from a different country (or the newborn babies that make up the other 30 percent of annual population growth).

According to Census data, only 38 percent of overseas migrants buy a home within 5-years of arriving in Australia (most of this will happen after year 3). Therefore, 62 percent of migrants rent for at least the first 5-years.

After being here for between 5 and 10-years, 56 percent become homeowners, while 70 percent of overseas migrants take 10 or more years.

In other words, it is not until many years after properly settling into Australian life that overseas migrants buy real estate.

Data analysis for the decade ending March 2023 confirms that, of the 493,232 average annual volume of properties purchased in Australia, recent arrivals from overseas purchased approximately 35,000 of them (or 7 percent).

Of the 60,000 extra Australian households created by overseas migration each year, at least 38,000 require rental accommodation.

It is a well-known fact that a large portion of renters change domicile more frequently than most owner-occupiers.

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 3-years.

Accordingly, of the 3.5 million rented homes across Australia, the existing tenant population generate approximately 1 million rental transactions per year.

Demand for rental accommodation each year is also created by hundreds of thousands of Australians in their late teens and early 20’s when they move out of their parent’s home.

Rental supply plays an important role in supporting our youth pursue independence.

Meanwhile, the 50,000+ divorces each year and countless domestic violence cases also create rental demand.

So, when the various categories of society are considered, 38,000 rental transactions created by overseas migrants represents about 3 percent of tenancy movements.

Anyone who, after reading all of the evidence in this report, still believes overseas migration is too blame for Australia’s current rental crisis is a bigot.

The root cause is a collection of policies introduced from 2014 onwards [refer above chart], long before this year’s overseas migration intake.

Discouraging rental suppliers means tenants are competing among themselves in a shallower rental pool.

Some things never change

History is littered with moments in time with rising house prices and segments of society jumping to the (false) conclusion that an elevated intake of overseas migrants was the cause.

People have been bemoaning ‘housing affordability’ in Australia for many generations, including this gem from 1904.

When Dr Victor Chang (Hong Kong, cardiac surgeon), Alex Jesaulenko (Austria, AFL legend), Dr Karl Kruszelnicki (Sweden, scientist) and Josef Chromy (Czechoslovakia, winemaker and developer) emigrated separately as young boys 4-7 years after the war, the value of a standard house in their new hometowns of Sydney, Melbourne and Launceston was between $3,000 and $5,000.

2-decades after that, people from all over Australia were complaining about ‘housing affordability’ when the parents of Matilda’s soccer superstar, Samantha Kerr, emigrated from India to Perth. A standard Perth house cost approximately $15,000.

The cries were still there when Usman Khawaja emigrated from Pakistan to Australia in the early 1990’s and house prices in large parts of Australia were between $90,000 and $130,000.

Personally, I consider it important that Australia’s migration heritage is forever respected.

Those who want to blame someone for the current plight of insufficient housing to buy and to rent should be directing it at the real cause, countless poor property policies, not overseas migrants.

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