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In recent times, Australia’s population has grown at an astronomical rate – and it’s not because loads more people are having many more babies.
In the 12 months to June 2023, almost half-a-million migrants arrived in Australia, and by the middle of this year, it’s expected that almost 300,000 more will follow them.
That’s a whopping 800,000 new Aussies in just a two-year period – the fastest immigration rate ever seen, contributing to the biggest overall population increase in several decades. In January, the number of people who call this vast land home ticked over 27 million.
What does this all mean for housing?
Most migrants rent – at first
History tells us that the vast majority of new arrivals to Australia rent when they get here, which makes sense. Buying a home is a massive commitment for anyone, let alone those who’ve come across the seas to start a new life Down Under.
Migrants tend to rent within close proximity to the city centre, which also makes sense. When you’re new somewhere, you probably want to be close to the action so you can get to know your new home.
If you’ve come for work or study, you’re also more likely to want to base yourself close to the office or university campus you attend.
This trend means that an influx of new arrivals creates competition in rental markets. When this coincides with a critical housing shortage, like the one we’re currently experiencing, there’s a much greater upward pressure placed on prices.
Then most eventually buy
Another trend that’s long been observed is that the overwhelming bulk of people who’ve moved here to make Australia their permanent home are aspiring homebuyers.
It’s understandable. They’ve put a lot on the line to uproot themselves, travel a vast distance, and start their lives all over again in a new country. The ambitious spirit required to undertake such a life-altering journey is similar to that needed to buy your own home.
So, it’s fairly safe to assume that at some point over coming years, a large chunk of those 800,000 or so new Australians looking for a pile or bricks and mortar to call their own.
Ask anyone in the market for a home now what conditions are like, and they’ll talk about queues or people out the door and down the street at most open-for-inspections. Buyer demand is high, and supply remains constrained, despite some positive increases in new listings.
This means prices continue to rise across much of the country, by about 10 per cent at a national level in the past year – and much more in particularly hot capital city markets.
We’re not building enough
Roughly speaking, about 175,000 new dwellings are built across Australia each year, comprising both houses and units.
Without any immigration, that’s not nearly enough to cater to our domestic population demands. That is, increases due to births, but also more importantly the formation of new homes – people moving out of their parents’ house, first-home buyers, share houses reducing in size, and so on.
When you consider the average household size of 2.49 people per dwelling, the estimated 800,000 migrants coming over a two-year period equates to an additional 321,000 homes being required.
You can start to see the supply versus demand economic principle being thrown wildly out of balance.
At the same time, the construction sector is still battling myriad issues since the Covid pandemic, from supply chain disruptions to soaring materials costs and an acute labour shortage. There have been several high-profile collapses of big builders and countless more smaller operators going out of business. So, the number of new homes coming to market has plummeted.
Governments have unveiled a suite of measures to try to boost housing supply, from billions in spending to incentivise developers to overhauls of planning systems to fast-track construction. Those will all take time, so the likelihood of a tsunami of supply coming to market anytime soon is nil.
Don’t demonise migrants
When home prices are rising and rents are through the roof, it’s tempting to look for someone to blame – and the 800,000 odd people moving here are an easy target.
In reality, policymakers are responsible for setting immigration rates and for pulling the levers of housing supply and demand.
It’s governments that have the power to incentivise development and make improvements to planning regulations, to increase supply. It’s also governments who can dictate demand by throwing money at those building new homes or buying their first places. And it’s absolutely governments who decide to invest in social and affordable housing – or not, as has been the case for the better part of a decade.
On top of that, it’s not just immigration to blame for housing demand. The way Aussies live has changed in recent years, with household sizes shrinking as people want more space to work from home, and the number of single-person households on the rise. At the same time, poor taxation settings keep older people in big homes they don’t need for longer, reducing the supply of dwellings that families want.
And Australia needs immigration. It’s good for our economy, it’s good for productivity, and it even helps with wages growth in the long-term.
It’s no easy ride
Assuming that new arrivals to Australia have it easy also overlooks a number of realities – the main one being the practicalities of buying a home.
Laws severely restrict what foreign investors can do with their money in Australia. Generally speaking, it restricts non-residents from buying established properties, forcing them to invest in new builds, which is good for supply overall.
For those who’ve moved here to start a new life, they can choose between an existing home or a brand-new one, but getting a mortgage is tricky.
They often have to stump up far bigger deposits than citizens, usually in the order of 30 per cent to 40 per cent depending on the Visa status that they may have migrated here with. Most won’t have a credit file in Australia, so assessing borrowing suitability is a real headache for those hoping to buy a home in their new country. They often have to jump through plenty of hoops to satisfy a bank’s criteria.
The type of visa they’re on and their pathway to either residency or citizenship status also matters, as does their type of employment and any contracts attached to it.
Getting a loan as a migrant is much, much harder than natural-born citizens. It’s not impossible, which is why working with a qualified and experienced mortgage broker is crucial. If you’re a recent arrival and want to buy a home for you and your family, we can help you navigate the tricky process and find a lending solution that works for your circumstances.
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