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International border reopening to add to rental squeeze

The return of migrants and international students from next week is expected to put more upwards pressure on rents but have little impact on house prices, industry experts say.

Feb 17, 2022, updated Feb 21, 2022
The flow of migrants and international students into Australia is expected to ramp up this month. Photo: Bianca De Marchi/AAP

The flow of migrants and international students into Australia is expected to ramp up this month. Photo: Bianca De Marchi/AAP

It is also expected to lead to a spike in demand for units, which have been less sought after throughout the pandemic as tenants and buyers looked for more spacious abodes.

The property market is back in full swing after slowing down over the final months of 2021.

More homes are going under the hammer than this time last year and about three-quarters of them are finding buyers.

House prices are following suit – rising 1.1 per cent nationally in January to end the month 22.4 per cent higher than January 2021.

In Adelaide, the January rise was 2.2 per cent and 24.8 per cent up on a year before.

But the future outlook of the property market is clouded by uncertainty.

A looming Reserve Bank interest rate hike is threatening to blow the wind from the market’s sails – and the reopening of international borders next week may not have quite the impact some people think it will.

CoreLogic’s January 2022 House Value Index.

The country’s international borders will reopen for double-vaccinated tourists, international students, and other visa holders on February 21 for the first time since March 2020.

Although population growth is widely seen as a major influence on the property market, experts say the arrival of international students and visa holders would have little impact on house prices and only affect the rental market.

The major banks have predicted prices will fall by 10 per cent in 2023 after the Reserve Bank is forced to lift interest rates to keep a lid on rising inflation.

But other experts disagree and believe we are more likely to see modest or zero growth than major falls.

Migrants rent before they buy

Propertyology managing director Simon Pressley said welcoming back international students and other visa holders would put upwards pressure on rents but have little impact on house prices.

He said this is because migrants are focused on establishing their careers, building their social networks and settling their family into the country when they arrive, rather than buying property.

“Imagine yourself leaving Australia to relocate to a different country; you will not jump off the plane, walk across the tarmac and go to an auction or an open home,” Pressley said.

What’s more, Pressley argues the effect of population growth on property prices is often overstated.

Population growth overstated

In the early days of the pandemic in 2020, Commonwealth Bank economists warned property prices could fall by more than 30 per cent if Australia was hit hard by COVID-19.

Instead, by the middle of 2021, the Australian housing market recorded its fastest annual growth since April 2004.

Pressley said the property market defied expectations by soaring during the pandemic, even though Australia’s population “flatlined”, growing at just 0.1 per cent in 2021.

This proves that overseas migration is only a “minority factor” in the overall property market, he said.

“They could keep the border closed for another two years and rents are going to go up by thousands of dollars every single year, there’s no question about that.

“But opening up the border just adds a little bit of extra pressure to what’s already incredibly intense.”

City rentals in high demand

Meanwhile, buyers agent Michelle May expects the arrival of international students and visa holders to boost demand for units and somewhat reverse a pandemic trend of house price growth outstripping unit price growth.

That trend occurred as the COVID-induced transition to working from home enabled people to work remotely and encouraged them to seek larger homes to find space for their personal offices.

“Last year, obviously, we’ve had phenomenal house prices,” May said.

“Unit prices have increased also, but not to the same extent – and I think that is going to be a correction in the market because the international market is much more open to higher-density living in a city.”

A version of this article was first published in The New Daily. Read the original article here.

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