Demand for housing is driving property prices in Melbourne. Demand is being accelerated by record levels of interstate migration, very high levels of international immigration and strong international student growth.
Melbourne and Sydney combined have had over 70% of the job growth in Australia in the last year. Many of those from the mining boom in Western and Southern Australia have needed new jobs. In all 11,760 people move out of WA and 6,541 people out of SA last year. For them Melbourne is more accessible, it costs less to live than Sydney, and has similar salaries for the same roles. This decision making has driven Victoria to record local migration growth.
International immigration recorded 231,000 new migrants entered Australia last year and 36% of them choose to make Melbourne home. Most of these people were adults with good employment skills and education. They were seeking to save to buy a home as soon as possible. This is instant housing demand. If they are 457 visa holders, there is a short term delay in demand, based on a few years of working and saving.
Housing demand is also fuelled by Chinese buyers. Compared to apartment prices in Beijing, with access to the right education, Australian property is very good value. Some of these buyers would be captured in the migration figures above however about Juwai.com. tells us that 33% of Chinese enquiries about Melbourne property are seeking an investment, and about 15% are buying property for their student sons and daughters. That’s about 48% of enquiries that are not captured in immigration numbers.
Government policy on the number of immigrants goes up and down over the years. Earlier this year there were plans to substantially change our immigration visas. This would have made it much harder to qualify to come to Australia. The 457 visa route amongst others, was to be closed. These plans were not supported in the Federal Parliament and there has been no change implemented.
However, it is very likely this has unsettled people. That it has drawn them out, people who were planning to come to live here and hadn’t put those plans into action. The current bump in immigration numbers may be this demand being brought forward by the uncertainty in the visa system.
Student visas are not recorded in the immigration numbers. We estimated that the value of international students to the Victorian economy was $5B when the sector was worth about $20B nationally. That was based on about 125,000 student visas. It is hard to know how many parents are in a position to buy their children property to live in while they study.
Melbourne has just been voted the number one brand for an international city. Another recent report from the Economist, rated Melbourne number one in the world for the seventh year in a row on liveability. Juwai.com now report that Melbourne is the number one destination for enquiries in Australia surpassing Sydney. Australia is the second most popular location in the world for enquiries on their website. There is something irresistible about this city.
As a result, Melbourne has recorded 2.4% population growth. That is huge. To put it in perspective internationally, the world’s population growth rate for 2016 reported by the World Bank was 1.2%. That compares to the peak rates in the mid 1960s of between 2% and 2.1%.
The emerging economies of China and India had 0.5% and 1.1% population growth in 2016 and under 2% in the mid 1960s. Most countries that still have high population growth rates are poor countries. Melbourne is a first world city.
So how do you slow demand for housing, and the resulting price rises led by such competition when you have 2.4% population growth in Melbourne? You can’t unless you flood the market with supply. There is an over supply of apartment property in the inner city, however with these levels of demand it is likely to be absorbed rather rapidly.