Falling population growth will constrain housing demand

Immigration has been a key driver of Australia’s population growth and economic growth, but what happens now that our borders are closed?

According to ANZ banks Housing Market Update, closed borders will limit new arrivals and remove the largest source of population growth.

Investor PropertyNet overseas migration currently accounts for around 240,000 people or nearly two-thirds of Australia’s population growth.

The federal government estimates that Australia’s net overseas migration is set to fall by more than 85% in 2020-21 from 2018-19 levels due to the international travel bans

This drop in population growth will remove a major driver of economic growth and housing demand, at least for a period according to ANZ.

Sydney and Melbourne are the key property markets likely to be affected by the cut in overseas migration.

In the year to June 2019, Sydney’s population grew by 87k, with 74k (85%) of those newcomers being overseas migration.

In Melbourne, the numbers are also significant, with 77k overseas migrants accounting for 68% of the total population growth of 113k.



Natural increase is unlikely to offset the fall in immigration

There are around 2.4m temporary residents in Australia.

Want to take advantageWhile some state governments have put in place temporary measures to support these residents, many are not entitled to unemployment benefits.

It is reasonable to expect that some could decide to leave Australia.

And they won’t be replaced by any new arrivals until the borders reopen.

Around 20% of temporary residents are students.

Many work in the hospitality or retail sectors, both hard hit by the social distancing.

Natural increase is unlikely to take up the slack from the decline in immigration.

Fertility rates are declining, population growth of the key demographic is slowing, and more strained financial considerations are likely to push out decisions to start or extend a family.




Why we need immigration

The two charts below from Michael Matusik confirm what the ANZ charts above show.

Without overseas migration Australia’s population would, in due course, start to shrink.

While some are currently suggesting this is a good thing, sadly, our economy would suffer.

Chart 1 tells shows that Australia’s baby boom continues, albeit at a slowing pace, see the red line and left-hand scale on chart 1.

Deaths are also rising (grey line and right-hand scale) due mostly to our ageing population.

As a result, natural increase – chart 2 – is on the slide. Natural increase is simply births minus deaths.

Natural Increase 1320x990

The longer-term outlook

After each previous recession, a new national immigration debate seems to emerge.

While no one knows when our borders will reopen, it is likely that Australia will remain an attractive destination for a variety of migrants due to work opportunities as well as from a lifestyle and health perspective.

By the way…permanent migrants don’t take Australian’s jobs – if anything they create jobs for others.

Research conducted for the Committee for the Economic Development of Australia found that the impact of recent migrants (post 1996) on the employment prospects of Australian-born workers was close to zero.

Long Term InvestIf anything, the impact on wages and labour force participation of locals was positive.

Opponents of Australia’s strong immigration program are misguided.

It has not only boosted gross domestic product and budget revenue, as would be expected when with more people, but also living standards – measured as GDP per person.

This is evident in relation to international students and working holidaymakers.

Their absence has created a crisis for the Australian tertiary education and agricultural industries.

The unemployed do not travel out of the cities for seasonal agricultural jobs ( we have a geographically immobile labour market), while local students do not inject the cash of international students.

The last thing that the Australian economy needs now as we’re working our way through the economic side effects of Coronavirus, is to hamstring the prospects for economic recovery by impeding the economic stimulus that immigration brings.

Australia’s migration program is the envy of other countries.

Indeed, its success has prompted Britain to consider changing its system to an Australian skills-based system assessed through points.

Temporary migration is certain to look very different over the next few years than it has over past few.

That’s its purpose – to adapt to changing circumstances.

Now is the time to take action and set yourself for the opportunities that will present themselves as the market moves on

If you’re wondering what will happen to property in 2020–2021 you are not alone.

You can trust the team at Metropole to provide you with direction, guidance and results.

In challenging times like we are currently experiencing you need an advisor who takes a holistic approach to your wealth creation and that’s what you exactly what you get from the multi award winning team at Metropole.

If you’re looking at buying your next home or investment property here’s 4 ways we can help you:

Strategic property advice. – Allow us to build a Strategic Property Plan for you and your family.  Planning is bringing the future into the present so you can do something about it now!  This will give you direction, results and more certainty. Click here to learn more Metropole
Buyer’s agency – As Australia’s most trusted buyers’ agents we’ve been involved in over $3Billion worth of transactions creating wealth for our clients and we can do the same for you. Our on the ground teams in Melbourne, Sydney and Brisbane bring you years of experience and perspective – that’s something money just can’t buy. We’ll help you find your next home or an investment grade property.  Click here to learn how we can help you.
Wealth Advisory – We can provide you with strategic tailored financial planning and wealth advice. Click here to learn more about we can help you.
Property Management – Our stress free property management services help you maximise your property returns. Click here to find out why our clients enjoy a vacancy rate considerably below the market average, our tenants stay an average of 3 years and our properties lease 10 days faster than the market average.


Australian Property Market Update, May 2020 | Property Insiders [VIDEO]

Which rental markets are most impacted by COVID-19

housing markets australia

Read more: propertyupdate.com.au