Lack of migration weighs on housing market

Sydney Airport

The mass return of expats at the start of the pandemic helped fan the flames of the residential housing boom since October last year, but that flood of arrivals has now slowed to a trckle. Picture: Damian Shaw

Demand for residential housing looks likely to be affected in the coming months as population numbers wane due to the lack of returning expatriates.

The mass return of expats at the start of the pandemic helped fan the flames of the residential housing boom since October last year, with many proving cashed-up and ready to buy.

A mammoth 750,000 net Australians have returned home since January 2020, according to Australian Bureau of Statistics travel data, in what is an almost doubling of historical trends. But the net flow has all but stopped since April as many look to restart the expat cycle.

At the same time, up to 390,000 people, who were in Australia on visas, have left the country since the pandemic began, leaving a shortfall of around 700,000 people, according to pre-Covid migration trends.

Nicholas Proud, the chief executive of the national independent body for social and affordable housing PowerHousing Australia, said the decimation of visa-class arrivals presents a looming market demand risk and future activity drop.

“While the expats have bolstered demand, the loss of certainty in migration presents the risk of a demand drop that will impact supply, creating further housing affordability uncertainty and disequilibrium,” Mr Proud said.

“With the borders not set to reopen until mid-2022 and only opening slowly after that date, this population gap will continue to widen.

“While expat demand is fuelling current activity, this activity will drop away without the visa-class demand driving ongoing growth to see housing activity continue at buoyant levels.”

CHOPPER

The massive rise in house prices has driven demand for affordable housing, particularly from first-home buyers who are increasingly being pushed out of the market. Picture: NCA NewsWire/Gaye Gerard

HSBC Australia and New Zealand chief economist Paul Bloxham last month flagged an expected halving in the pace of house prices in 2022.

The prediction would see price gains of 11 to 13 per cent this year reduce down to 5 to 9 per cent growth as housing stocks enter an oversupply as a result of closed borders and stagnant population growth.

As population pressure recedes, new dwelling approvals have begun to slow from the record highs reached in the four months to March when the federal government’s HomeBuilder pandemic stimulus was moving through the market.

A total of 219,720 new building approvals were granted during the 2021 financial year – 37,800 properties more than the 20-year average and far higher than the 172,659 dwellings approved in the previous year.

While this should have taken the edge off rising prices, low-interest rates helped bolster demand as the higher level of expats returning home to Australia were competing for first-home buyers and upgrading owner-occupiers for housing.

Housing finance last financial year hit $319bn (excluding refinancing), around $100bn higher than the previous two years.

Mr Proud said the massive rise in house prices has driven demand for affordable housing, particularly from first-home buyers who are increasingly being pushed out of the market. He believes there is now a political opportunity for long-term affordable housing delivery.

“Structured government-backed equity investment could create 10,000-20,000 dedicated affordable homes if government backed 4-7 per cent returns to shore up the housing delivery pipeline as we get to an uncertain 2022-23 year ahead.

“There is a need to think beyond recent stimulus to focus on a dedicated affordable supply with a lens to balance a situation that we have never faced as a country.”