Based on the latest Government forecasts, the number of long-term immigrants into Australia could drop by almost 300,000 in the coming years, which would spell trouble for certain areas of the Australian property market.

One of the major drivers of Australia’s long-term growth in property values has been the steady levels of immigration.

With the Government predicting that immigration will fall by up to 85%, in the coming 12 months alone, that could mean little growth in the short-term – but once the borders reopen, things could change dramatically.

SMATS Chairman, Steve Douglas, says the slowdown in immigration has been hitting certain segments of the market harder than others.

“I’ve always said for the last 25 years that the key to Australia’s success as a property market has been our population growth.”

“With our borders closed, intended migrants haven’t been able to come in. We’ve had a bit of a surge of expatriates coming back, but they may or may not stay.”

Mr Douglas says the fall in student numbers has been particularly telling.

“Short-term and student accommodation are probably the hardest hit. Anything like Airbnb has been fueled by the tourism industry. That’s flattened out to basically zero. We’re seeing that particularly in Melbourne in the CBD, where there are many students.”

“We’re seeing tens of thousands of students stuck abroad and not being able to come back to Australia to continue their studies and have been forced to shift to online.”

Steve Douglas, feels that while there will be some short-term ramifications on the back of the tight border controls.

“Because of the borders being closed, anyone who did not get back to Australia or migrate prior to March is going to have trouble getting into the country.”

“There’s very limited flights, there’s very limited and strict rules, and you have to go into isolation. It’s difficult to move your furnishings and all these sorts of things. So I think we’re going to have a temporary reduction in the population growth as migrants, in particular, find it very difficult to travel and move”. 

The Melbourne CBD Hit Hard

Laura Scott, Senior Property Manager at Aussie Property has already started to see the 

Melbourne CBD market taking a hit.

“We have been seeing a huge halt in the CBD market stock. Due to the boarders being shut this is the hardest area hit by COVID-19.”

“When you have new builds nearing settlement, short stay accommodation companies heavily hit, students who cannot come back into the country, therefore they are exiting their tenancies & with many of the tenants who work in tourism/hospitality, they generally live in the CBD.”

“When you put all of the above together you have a huge over supply of vacant apartments in the CBD & inner CBD areas.”

Laura Scott says that this short-term phenomenon is having a big impact on prices and vacancies, but not everywhere is impacted.

“The vacancy rate for this area is larger than we have seen before, we have had to drop rents dramatically even then this isn’t helping with leasing the properties. Unfortunately, I believe a lot of these apartments will sit vacant until this is all over.”

“Outer suburbs of Melbourne are leasing well, if anything these properties are leased within 2-4 weeks. I haven’t noticed a huge impact to the broader rental market.”

An Immigration Boom Around the Corner

Despite the short-term halt to immigration, Steve Douglas believes this could actually lead to a boom in new arrivals.

“I think we’re going to have a kick up where immigration is going to accelerate faster and largely because of the fact that you’ll have the pent-up demand from those that didn’t arrive.”

“And then you’re going to have a lot of people say, wow, what a major, major thing this was in the world. And if we’ve got to go through something like this again, I might as well go and enjoy myself in a country as lovely as Australia, then be working my tail off in some place that is purely just an employment driven destination.”

Mr Douglas also suspects the way Australia has handled the crisis, might make it an even more appealing destination in the future.

“I think you’re also going to find a lot of people that have been considering going to other countries like the US or Europe may look at Australia as a much better alternative because of the way that we have handled this crisis as well. Australia is looking at this stage to end up being in the COVID champions of the world.”

“What will happen is Australia’s reputation is going to be greatly enhanced and the way it’s been handled by our state and federal leaders has been commendable. The amount of cases is phenomenally low for a population of our size.”

Mr Douglas feels that the way immigration plays out over the next few years will have a large bearing on how prices respond.

“This population growth is literally going to be the determining factor as to where the property market goes over the next six, 12 and 24 months.”

“That could be the silver on the lining of this whole COVID issue is that it puts a real big spotlight on Australia as to how wonderful a place it is – which we’ve always known.”

“If that happens, expect the property market to have a mini-boom.”