There’s a lot of talk in the real estate market about how the Covid-related fall in immigration might affect property prices in Australia over the next few years.
For property buyers and sellers, this is an issue that needs to be explored. As your local real estate agent, I thought I would offer a perspective.
The first point to make is that real estate prices have always benefited from new people settling in Australia. Immigration hovered around 200,000+ each year before Covid. The combination of a constant stream of new residents, plus an ongoing shortage of new property on the market has always worked to keep demand for homes – and prices – strong.
But the Federal Government predicts we’re likely to go negative, losing 70,000 residents due to those returning to their country of origin with the Covid pandemic.
These forecast numbers could mean the demand for construction and investment properties starts to ease. However, we need to consider this carefully. There has always been a shortfall of the number of new properties needed versus the number of new properties supplied which means that even without migration, demand is likely to be solid for a while.
And we’ve heard dire predictions of collapse before. During the Covid crisis, even organisations like the Commonwealth Bank, predicted values would plummet by up to -30 per cent. Yet, home values stayed remarkably stable, then grew again, and there are several reasons for this.
We are enjoying record-low interest rates, which make it more affordable to enter the market or climb the property ladder.
Government – both state and federal – have rolled out grants and savings schemes to help first-home buyers, as well as offer discounts on stamp duty. This has served to fortify the foundation of the entire housing market.
Governments have also offered incentives for new homes and this has been widely taken up.
We’ve also seen fewer properties for sale, and this lack of supply has created a level of pent-up demand on the buy-side, thus ensuring values to hold their own.
So the most significant impact of reduced immigration due to Covid will not be the average family home but investment properties and apartments.
Rents are under pressure because of the exodus of overseas students and lack of new residents who’d normally rent before they buy. The cities most in the crossfire are Sydney and Melbourne, which attract most of our immigration and student populations.
Economists tend to agree owner-occupied homes are insulated because of the current level of buyer demand.
These are general observations, of course, and the value of your home depends on more localised factors, such as its position, availability of amenities, and proximity to cafés, restaurants and schools as well as its features and the quality of the fittings, land value and how well it has been maintained.
In Australia, we have thousands of micro-markets in real estate, and each one performs differently depending on the profile of the local area and style of property.
If you’re concerned, or interested in understanding the current value of your home, or considering investing, we’d be delighted to discuss how our local market is performing and what this might mean for you.