Will An “Open Australia” Drive Up Property Prices Further?

DG Institute
DG Institute

Published 5:33 am 19 Nov 2021

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Australia could see an additional intake of two million new migrants over the next five years. Will this be the catalyst to propel the property market to even further heights? 

When the COVID-19 pandemic hit, Australia’s property market acted in complete defiance of expert predictions. Instead of seeing a downturn in values, Australian property prices soared to unseen heights amid 20-21, and have continued to do so. 

Over the past twelve months, Adelaide’s property values have climbed by 19.3%, Brisbane’s have climbed 20.7%, and Sydney’s property values have risen by 24.4%. 

Now, as the year comes to a close, experts are predicting that affordability constraints combined with rising interest rates will cause Australia’s property market growth rate to taper off over the next 24 months. 

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Westpac’s Chief Economist, Bill Evans, said that “As for 2022, the strong momentum will continue but the pace of gains is expected to slow, levelling out over the course of next year before moving into a correction phase in 2023.”

But have experts overlooked a key factor that could continue to drive up property prices?

Australia’s gates are about to reopen 

When the COVID-19 pandemic hit, Australia battened down the hatches and effectively shut its borders to the outside world. 

What this meant was that Australia’s net migration for 2020/2021 was negative for the first time since 1945, resulting in the lowest population growth in a century.

This has resulted in a labour shortage, and is estimated to have cost the economy $36.5 million per day, which is precisely why leaders are eager to reopen the borders and resume our intake of migrants. 

Top bureaucrats last week urged New South Wales’ new premier, Dominic Perrottet, to consider “an aggressive resumption of immigration levels as a key means of economic recovery and post-pandemic growth”.

In practical terms, this would see Australia’s net migration increase to an unprecedented 400,000 a year for five years, meaning the nation would take in two million migrants over that period. 

Speaking on the heightened need for migrants, Mr. Perrottet said

“If we lose this opportunity, those skilled migrants will go to other countries. We won’t get those engineers, those accountants, they’ll commit to other projects.”

Now, as Christmas quickly approaches, Australia’s borders are reopening to international migrants, which should help ease the labour shortage around the busy period. 

Will open borders drive up Australian property prices? 

While experts such as Westpac’s Bill Evans predict that Australia’s property market could enter a “correction phase” in 2023, the dramatic uptick in migrant numbers may undo these predictions, argues AMP Capital chief economist Shane Oliver.

According to Oliver, “If immigration is suddenly ramped up again, as the New South Wales Government has been proposing, and you’re actually running immigration above pre-Covid levels for a while to make up for the shortfall that occurred through the pandemic, that could turn a price decline in 2023 into a price rise.”

Furthermore, Oliver estimates that for every 250,000 immigrants that come into the nation, Australia would need to build 80,000 houses.

“In recent times we’ve been sort of getting on top of the supply shortfall in Australia because of the lack of immigrants,” he said. “If we quickly ramped up immigration again, then that would rapidly take us back into a severe supply shortfall, which would put upward pressure on rents and prices.”

This uptick in the number of migrants over the next few years could propel Australia’s housing prices up by about 5 per cent by 2023, according to Oliver, with rents rising about 7 per cent.

A double whammy 

Not only will there be several hundred thousand additional people competing for houses in Australia over the coming years, but the labour shortage will also be quenched with this influx of migrants. 

So, while house prices are driven up by demand, a growing supply of workers will place downward pressure on wages growth – a double whammy for Australians looking to get into the housing market. 

The current labour shortage has seen workplaces scrambling to hire employees, with many offering additional wages or incentives in the hopes of attracting promising candidates. This is a trend that will likely reverse amid heightened migration numbers.

And, all of this is on top of the fact that Australian house prices are already growing at a faster rate than wage growth

In summary, the housing market may become even less affordable in the years to come.

How can you capitalise on Australia’s property growth? 

With wages set to stagnate and property prices expected to continue climbing for the next 12-24 months, things might seem rough for those that want to get into the property market.

But the reality is, now is the perfect time for property investors.

With record levels of housing price growth and growing demand for properties, the conditions are ripe for property investors to achieve some fantastic results. 

But how, you ask?

Through small property developments, like subdivisions and DA uplifts! 

These simple strategies have generated five, six, and even seven-figure profits for our students, and in some cases, they didn’t even use their own money! 

We’ll be teaching you how all of this is possible at our upcoming Property Development Summit, so register today to ensure your seat. 

What are you waiting for?

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Lawyer, Asset Protection Specialist and Property Educator

Dominique Grubisa is a practicing lawyer with over 25 years experience. She is a property investor and developer, an entrepreneur with businesses in Australia and Southeast Asia, a speaker, educator, writer and published author.

This column has been written for general information purposes only. It is not intended as legal, financial or investment advice and should not be construed or relied on as such.

About DG Institute

Founded in 2009, DG Institute strives to empower everyday Australians to grow and protect their wealth. Our goal is to provide direction, motivation and inspiration to our clients and help them perform at their very best. We do that through our professional services, in addition to teaching them how to grow their wealth through property and business education.

This column has been written for general information purposes only. It is not intended as legal, financial or investment advice and should not be construed or relied on as such.

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