Do you remember in March last year when our international borders were slammed shut overnight?
Of course, none of us knew that they would stay that way for the next year and a half, but here we are…
That said, one of the reasons behind some of the alarmist “property doom” predictions that were sprouted at the time, the axing of overseas migration was supposedly going to make real estate prices fall dramatically.
Forecasts of 20 to 30 per cent price drops were bandied around like confetti – even though history had shown us the resilience of real estate time and time again.
Towards the end of last year, though, some of those so-called commentators had to start eating their words as prices starting to intensify.
Not only did they start to strengthen, but they also actually started to sky-rocket in a way that had never happened – at the same time everywhere – before.
Demand versus supply
Here’s the thing: the property markets in Sydney and Melbourne were predicted to bear the brunt of the non-existent overseas migrants and international students, but that has proved to be spectacularly untrue.
According to the latest data from CoreLogic, the median dwelling value in Sydney has soared 23.6 per cent over the year ending September and in Melbourne it has risen by 15 per cent over the same period.
Clearly, the fact that the borders were closed to new overseas migrants made no difference to markets, because there were other more important factors at play.
These fundamentals predominantly included record low interest rates which created the cheapest credit ever as well as the continued low supply of property listings.
Totally property listings remain low, but now that is because of strong buyer demand soaking up the available supply.
I believe that too many investors use population growth as some sort of precursor to superior capital growth prospects, when in reality if a location has plenty of new residents, then supply usually ramps up to accommodate them. And we know, supply is the enemy of price growth.
Holding its ground
Some new data out of the Australian Bureau of Statistics also shows that the nation’s population actually held up very well during the pandemic.
In fact, most states and territories had positive population growth over the year ending March this year, with Queensland recording the highest growth rate at 0.9 per cent, while Victoria had the only negative rate on -0.6 per cent.
For the nation as a whole, our net population growth was up ever so slightly, by 0.1 per cent or 35,700 people, according to the ABS.
Now this increase was due to an annual natural increase of 131,000 people, but also the fact that our net overseas migration was down less than 100,000.
How can it be that the records only show a net overseas migration deficit of 95,300 over the past year?
Well, it’s because more than 150,000 expats returned to live in Australia over the same time – returning residents who probably won’t be leaving again anytime soon.
With international borders soon to reopen, and international students already slated to return, we are likely to see our national population start to increase strongly over coming years.
In some cities and major regional locations, these new residents may add to the property price pressure those areas are already experiencing – but only if there is not enough supply available to meet this additional demand, amongst other more important investment fundamentals.