Home Insights Rents set to keep climbing as migration returns. There’s a small silver lining

Rents set to keep climbing as migration returns. There’s a small silver lining

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Migration to Australia has returned strongly in recent months amid an already tight rental market. Where will we see the impact of this additional demand?

In August, the estimated total number of temporary visa arrivals exceeded 300,000 for the first time since the pandemic began. Australian Bureau of Statistics data.

Immigration is back in a big way and the housing market will feel the impact.Photo: Getty

While still below pre-pandemic levels, this is a significant increase from near-zero arrivals in the Covid era.

Cohorts have little impact on rental demand, as temporary visitors make up the majority (more than two-thirds) of international arrivals.

But other temporary immigrants are also returning. In August he had over 40,000 students. Still less than at the same point in 2019, but not much. [1]

Of course, data on total arrivals is just that. not the total number of people arriving in Australia, Net Population growth due to immigration – similarly, it does not consider departures. The net numbers are important for population and therefore housing demand.

Unfortunately, net migration data is not timely. Still, the data we have paints a clear picture.

Net migration was very strong in the March 2022 quarter, at just under 100,000 over the three-month period. This raised the annual population growth rate he to 0.9%.

This population growth will put upward pressure on rental demand in an already tense situation.

The number of properties listed as available for rent on realestate.com.au has fallen by just under a fifth in the capital compared to last year. The region has also experienced a significant drop in availability for most of the pandemic period, with very slight signs of improvement at best in recent months.

Additional demand from re-migration at a time of tight housing supply will contribute to the continued and advertised rapid rise in rents we are seeing.

There are already signs consistent with that dynamic. Rents are rising particularly rapidly in areas where recent immigrants typically travel. These are mostly urban centers, often near major universities.

Naturally, this pattern What we saw during the pandemic when borders are closed. In 2020-2021, the inner-city rental market has been very weak, especially in Sydney and Melbourne, where advertised rental prices have fallen significantly.

The silver lining is that many areas are seeing very rapid rental growth. now – and where increased migration will add additional demand – are areas where rents will be charged fell during a pandemic.

In general, the areas with the highest rate of rental market growth over the past six months are inner-city areas, where rents plummeted during the pandemic. [2]

This pattern likely reflects the catch-up of poor performance during the pandemic and the fact that rental markets are currently tight and increasingly tight in these sectors.

In the short term, rents may continue to rise vigorously. With vacancy rates low across the country and population growth returning, rental demand shows little signs of easing.

But there are signs that investors are coming back. New lending to investors has declined in recent months, but he has increased by 6.5% compared to the same period last year.

This will start to help get more supply back into the rental market, but it will be a slow process. The number of new investors is small compared to the size of the rental market.

[1] Not surprisingly, total student arrivals are highly seasonal, so comparisons are made to the same months in 2019 for consistency. Nearly 55,000 total students arrived in August 2019.

[2] Part of this negative correlation between rent growth during the pandemic and the past six months reflects a regression to the mean. However, in a placebo test in which he performed this exercise three years earlier, many A weak (albeit still negative) relationship.

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