Australia Prepares for a Post-Pandemic Population Boom
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Australia Prepares for a Post-Pandemic Population Boom

Property experts say a rush of people will come as soon as border restrictions ease.

By Kirsten Craze
Mon, May 31, 2021 10:44amGrey Clock 5 min

Australia’s international borders were snapped shut with the arrival of Covid-19 in March 2020, and more than a year later our island nation is still closed to new arrivals. As a result, the country, which relies heavily on overseas migration to boost its economy and housing market, has experienced its first negative population growth in more than a century.

One year into the pandemic, Australia’s migrant stock was 300,000 people fewer than it would have been, coupled by a net migration decline of 97,000 people, according to Federal budget estimates.

By 2030, the Australian government estimates the country will be “missing” 1 million new people. As of June 2020, the Australian Bureau of Statistics recorded that there were more than 7.6 million migrants living in Australia, with 29.8% of the total population born in another country. England was the largest group of overseas-born migrants at 980,400, followed by those born in India at 721,000 and then Chinese migrants third at 650,600.

The hit to Australia’s population growth rate is already taking its toll on some parts of the property market, particularly inner city apartments. However, when borders do reopen, property and population experts predict that Australia’s successful and vigilant handling of the pandemic—Victoria instated Thursday a weeklong statewide lockdown in response to a cluster of only two-dozen or so cases—and its rebounding economy will attract the attention of cashed-up migrants and foreigners seeking out shrewd investments.

Understanding the Migration Equation

In the Federal Budget announced earlier this month, the government hinted at a “gradual return” to temporary or permanent migration, but no sooner than mid-2022. As a result, Australia’s population is predicted to be about 25.88 million by the end of next year.

Tim Lawless, head of research for property data firm CoreLogic, said the long-term impact of this blow to Australia’s population growth will be multilayered.

“If the Treasury forecasts are right, this means the rate of population growth will be the lowest since 1917. This will be disruptive to housing demand. However, the impact will not be evenly spread,” he explained.

“We need to consider the composition of housing demand. In the last few years at least, about 70% of migration has been temporary; it’s been students and visitors. And about 30% have been permanent migrants,” he continued. “Temporary migrants will usually rent, and even permanent arrivals typically rent before they buy anyway, so there’s always been a bit of a lag.”

As a result, inner city vacancy rates soared and rents dropped, particularly in Sydney and Melbourne where most new arrivals initially land. A return of both temporary and permanent migrants would create an immediate demand throughout metropolitan rental markets and provide opportunities for investors coming back into the market.

 

Savvy Investors Will Be Ready for Open Borders

Simon Keustenmacher, social demographer and co-founder of Melbourne-based demographic advisory firm The Demographics Group, said Australia’s big city mayors and property developers are keen to reignite inner cities post-pandemic.

“The inner city rental market of relatively small dwellings—one or two bedroom apartments—has suffered because there are no new arrivals or international students. The more you can get to come, the more everyone will get out of it because they just invigorate these areas and put capital back into the economy,” he said.

Although no one knows yet how many temporary and permanent migrants Australia will welcome, or when, Mr. Keustenmacher is sure housing demand will skyrocket when they do.

“People will want to come to Australia at a much higher rate than we will take people in, I’m certain,” he said, adding that it’s especially true of the top end of the income spectrum. “More and more migrants will want to come to Australia because they’re thinking, ‘Where can I have the best lifestyle?’”

Mr. Keustenmacher said he envisaged Australia’s skilled migration list becoming shorter and more specific. Those highly skilled, well-paid workers who do arrive in Australia will have an additional challenge when seeking a home as they will be in direct competition with another huge slice of the population.

“Plenty of those high-income earners arriving in Australia will be in the family stage of their lifecycle so they’ll be competing for the most sought after property—three- and four-bedroom houses. Demographically speaking, that’s the hottest market to be in because Australia’s millennials, who are also in the family stage of life, are our biggest generation right now,” he explained.

“Therefore, if people buy purely for investment they should buy whatever property is deemed to be rare, because prices will be driven up,” he said.

 

Things Could Go From Good, to Even Better

Despite unprecedented negative population growth, Australia’s dwelling values did not suffer throughout the second half of 2020 and into the first quarter of 2021. On the contrary, in March alone, CoreLogic’s national home value index recorded a 2.8% increase, the fastest pace of monthly growth in 32 years.

John McGrath, founder of Australia-wide realtor group McGrath Real Estate, said when new arrivals return, housing demand is likely to increase even further.

“Whilst the current surge in local demand and property values will no doubt plateau in the near future as the inevitable buyer fatigue calms things down, international borders opening up will be the next catalyst for price growth,” he said.

During the height of the pandemic in mid-2020, real estate agents across Australia noted a sharp uptick in inquiry from Australians living overseas hoping to return home, or at least invest on home soil.

“We have already sold a number of properties to expats sight unseen off the internet over the past 12 months, but this will escalate rapidly as borders open,” he said.

To date, a wave of international interest in Australia’s luxury properties close to beaches or in rural settings has put upward price pressure on lifestyle locations, and Mr. McGrath said he believes that will inevitably create a trickle-down effect.

“While much of the demand will find its way to higher priced homes upward of $10 million , I expect we will see buying across all price ranges as people seek to migrate to Australia,” he said. “Traditionally, the vast majority of these immigrants investing into Australia have focused on Sydney and Melbourne, but due to lifestyle and workplace changes post-COVID we should see a wider spread of investment including many regional lifestyle areas.”

Waves, Wine and Wool

Three types of lifestyle markets have been highly sought after since the pandemic forced individuals to reconsider their priorities and work-life balance. Beach locations, wine regions and rural estates have all been hot property.

“Some of the really high-profile lifestyle markets would probably be on the radar for returning expats, or foreign migrants,” Mr. Lawless said. “If we do see more migrants arriving, or expats returning, a lot of them will be looking at not just Sydney or Melbourne, but also the likes of Byron Bay, Noosa or the Mornington Peninsula.”

A shift to remote working has meant these areas, some of which are hundreds of miles from employment hubs in the cities, are no longer disadvantaged by long commute times.

 

People Can’t Travel to Australia, but Money Can

The fact that international borders are closed isn’t holding back keen foreign investors who are playing the long property game.

“They don’t even need to move to Australia right now. Currency and capital can still flow across the border,” Mr. Lawless said.

“Expats or potentially foreign buyers would be looking at Australian real estate because it’s a pretty good investment at the moment. It’s on a strong capital gain trajectory and considering where mortgage rates are, it’s also relatively high yielding,” he explained.

Australian expats can buy established property, though foreign investors or potential migrants are restricted to purchasing new properties or buying land with the purpose of building a home, according to Australia’s Foreign Investment Review Board guidelines.

“There is limited availability for newly built apartments in some areas as construction is starting to wind down, but if you looked around Sydney and Melbourne, there are still plenty of apartments underway,” he said.

“We’ll see a few years down the track, considering how Australia has managed Covid-19 as well as just the sheer liveability of Australia, that this is going to be a very popular place. If I wasn’t in Australia I’d certainly want to be, put it that way,” Mr. Lawless said.

Reprinted by permission of Mansion Global. Copyright 2021 Dow Jones & Company. Inc. All Rights Reserved Worldwide. Original date of publication: May 30, 2021



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The city’s real-estate market has been hurt by high interest rates and mainland China’s economic slowdown

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Hong Kong has taken a bold step to ease a real-estate slump, scrapping a series of property taxes in an effort to turn around a market that is often seen as a proxy for the city’s beleaguered economy.

The government has removed longstanding property taxes that were imposed on nonpermanent residents, those buying a second home, or people reselling a property within two years after buying, Financial Secretary Paul Chan said in his annual budget speech on Wednesday.

The move is an attempt to revive a property market that is still one of the most expensive in the world, but that has been badly shaken by social unrest, the fallout of the government’s strict approach to containing Covid-19 and the slowdown of China’s economy . Hong Kong’s high interest rates, which track U.S. rates due to its currency peg,  have increased the pressure .

The decision to ease the tax burden could encourage more buying from people in mainland China, who have been a driving force in Hong Kong’s property market for years. Chinese tycoons, squeezed by problems at home, have  in some cases become forced sellers  of Hong Kong real estate—dealing major damage to the luxury segment.

Hong Kong’s super luxury homes  have lost more than a quarter of their value  since the middle of 2022.

The additional taxes were introduced in a series of announcements starting in 2010, when the government was focused on cooling down soaring home prices that had made Hong Kong one of the world’s least affordable property markets. They are all in the form of stamp duty, a tax imposed on property sales.

“The relevant measures are no longer necessary amidst the current economic and market conditions,” Chan said.

The tax cuts will lead to more buying and support prices in the coming months, said Eddie Kwok, senior director of valuation and advisory services at CBRE Hong Kong, a property consultant. But in the longer term, the market will remain sensitive to the level of interest rates and developers may still need to lower their prices to attract demand thanks to a stockpile of new homes, he said.

Hong Kong’s authorities had already relaxed rules last year to help revive the market, allowing home buyers to pay less upfront when buying certain properties, and cutting by half the taxes for those buying a second property and for home purchases by foreigners. By the end of 2023, the price index for private homes reached a seven-year low, according to Hong Kong’s Rating and Valuation Department.

The city’s monetary authority relaxed mortgage rules further on Wednesday, allowing potential buyers to borrow more for homes valued at around $4 million.

The shares of Hong Kong’s property developers jumped after the announcement, defying a selloff in the wider market. New World Development , Sun Hung Kai Properties and Henderson Land Development were higher in afternoon trading, clawing back some of their losses from a slide in their stock prices this year.

The city’s budget deficit will widen to about $13 billion in the coming fiscal year, which starts on April 1. That is larger than expected, Chan said. Revenues from land sales and leases, an important source of government income, will fall to about $2.5 billion, about $8.4 billion lower than the original estimate and far lower than the previous year, according to Chan.

The sweeping property measures are part of broader plans by Hong Kong’s government to prop up the city amid competition from Singapore and elsewhere. Stringent pandemic controls and anxieties about Beijing’s political crackdown led to  an exodus of local residents and foreigners  from the Asian financial centre.

But tens of thousands of Chinese nationals have arrived in the past year, the result of Hong Kong  rolling out new visa rules aimed at luring talent in 2022.

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