Can Australias property market sustain negative immigration growth and house prices fall for half a year?

category:Finance
 Can Australias property market sustain negative immigration growth and house prices fall for half a year?


Data released by the Australian Bureau of statistics on the 15th showed that the unemployment rate in September rose to 6.9% from 6.8% in August, 1.7 percentage points higher than that in the same period last year. Previous data showed that the countrys gross domestic product (GDP) fell by 0.3% in the first quarter and 7% in the second quarter, falling into the first technical recession in nearly 30 years.

Real estate research firm CoreLogic released data at the end of September showed that Australian house prices had fallen for five consecutive months this year, with July, August and September falling by 0.6%, 0.4% and 0.1% month on month respectively.

Michaelpalir, managing director of Sydneys Sotheby international real estate, said in an interview with the first financial reporter that the epidemic had a great negative impact on tourism, hotel and other service industries, and the rise of unemployment was inevitable, but technology and mining industries were almost unaffected by it, but became the beneficiaries of hot money flows.

Im still optimistic about the outlook for Australias property market. Interest rates are so low that as long as the government relaxes immigration and travel policies again, market demand will increase rapidly and prices will rise again, he said

Can housing prices hold up without immigration?

Two years ago, at an overseas real estate exhibition in Shanghai, an Australian property consultant wrote only six words on his ppt: immigration! Immigrants! Immigration! .

He is right that a net inflow of people - especially the continued inflow of young and wealthy people - is undoubtedly a major positive factor for the housing market.

According to the Australian Bureau of statistics, the countrys population increased by about 4 million from 2008 to 2018, of which the inflow of immigrants contributed 62% of Australias population growth.

But the real estate consultant obviously didnt expect the black swan incident scenario in which immigrants suddenly plummeted in 2020. According to the latest estimate of the Australian government, the net outflow of immigrants in this fiscal year will be about 70000, compared with the average annual net inflow of about 240000, which means that the total number of immigrants will be reduced by about 310000 this year, and the current total population of Australia is no more than 25 million.

Mark Mccrindle, founder and head of the mcclindle Research Center, said net population growth was an important factor driving Australias economic growth, accounting for about a percentage point of GDP growth each year. Novel coronavirus pneumonia predicts that even in the most optimistic scenario, the vaccine can quickly and effectively suppress the global epidemic. According to his latest model, the population increased to 29 million 600 thousand in 2031, and 740 thousand fewer than the Bureau of statistics before the outbreak of the new crown pneumonia outbreak. If the worst prospect is the long-term persistence of the epidemic, then the population of Australia will only increase to 28 million 600 thousand in 10 years, compared with the previous statistics. The Bureaus estimate is 1.7 million less.

Mcclindel believes that whatever happens, the government should be prepared for the significant impact of fewer immigrants.

Shane Oliver, chief economist at amp capital, said the decline in population growth was so obvious that the number of new babies simply couldnt make up for the gap. The consequences were obvious: GDP fell, middle-class jobs were lost, and the real estate market was hit.

The housing sector has been most affected. In the past, we needed about 175000 new homes a year to meet market demand because of the influx of immigrants, but this year, with the loss of immigrants, we may need only 75000, Oliver said. Immigration has helped the property boom, particularly in Sydney and Melbourne in recent decades.

House prices fell for half a year, the government rescued the market

Since the outbreak of novel coronavirus pneumonia in the early years, although the volume of transactions in most developed countries has dropped sharply, the price of housing has not fallen synchronously, and the average housing prices in some countries have even risen against the trend (the United States, Germany, etc.). During this period, affected by the property market downturn in Melbourne and Sydney, the average price of Australian housing has fallen for two consecutive quarters.

According to the latest data of CoreLogic, the average price of Australian housing fell by 1.1% month on month in the third quarter of this year. However, due to the strong growth trend at the end of last year and the beginning of this year, it still increased by 4.8%; among them, Melbourne and Sydney fell the most, with a month on month decrease of 3.3% and 1.6% respectively.

According to the latest survey results of local real estate analysts by foreign media, the house prices in Melbourne and Sydney are expected to fall by 2% and 7% respectively in 2020, and may continue to fall by about 4% in 2021.

The real estate market is an important part of the Australian economy, and the impact of the housing market turmoil on the Australian economy can not be underestimated. According to official data, the housing construction industry alone contributes about 2% of Australias employment rate and 6% of GDP.

But as population growth has fallen, so has government investment in the real estate market. According to data from the Australian Ministry of finance, in the 2019-2020 fiscal year, residential investment fell by 8.8% year-on-year, while the current fiscal year is expected to fall again by 11%, and it is expected to rebound by about 7% in the next fiscal year.

According to the latest report released by the Australian Foreign Investment Review Board (FIRB), the volume of foreign investors real estate transactions in Australia fell by 11% in the previous fiscal year to 9295, and this situation is expected to continue to deteriorate in this fiscal year.

Mark Steinert, CEO of stockland, a real estate developer, said: because of the low level of population growth, new housing starts are more likely to decrease rather than increase, especially apartments. The decline in foreign students and immigration has had a huge impact on the apartment market.

Palier told the first finance reporter that it was not surprising that Sydney and Melbourne were leading the decline in house prices, because these two cities are the most crowded places for immigrants and foreign students.

Sydney and Melbourne are big, and each region is different. Take Sydney as an example. At present, there is an oversupply of housing in the center of the city, because many people have left, and the students who lived there have been unable to return. However, the prices of high-end properties in the eastern suburbs have gone up. Because Australia has relatively good control over the epidemic situation, many wealthy people who worked in Europe and the United States have returned to live, and they prefer luxury houses with good environment and large space. u201dThats what Palier said.

In order to avoid further crisis caused by the continued decline of the property market, the Australian government has included a series of stimulus measures in its latest budget, including increasing the number of first-time home buyers loan guarantee scheme to 10000 places. According to this policy, first-time home buyers only need to pay 5% down payment, and the remaining 15% is provided by government guarantee; in addition, the government will provide 1 billion Australian dollars To support the construction of affordable housing.

Over the past three years, the government has imposed very strict restrictions on mortgage applications, Palier said. They first look at your credit card bill, how much money you spend in the restaurant, and so on, and then decide how much you can borrow, but now its more relaxed and you can borrow more.

What is the future of the property market? The epidemic is still the key

In the second quarter, the first peak of the global epidemic appeared, but the decline was relatively fast. As a result, the number of inquiries in summer rose by 40% month on month, reversing the downward trend in the first quarter. However, in the third quarter, the number of Australian real estate inquiries recorded by juwai.com decreased by 43.6% month on month and decreased by 51.5% year-on-year. This may be because the global epidemic hit again in autumn, breaking buyers And the optimism.

According to the data provided by juwai.com, since 2014, due to the demand of immigration and studying abroad, Australia has always been one of the most popular home buyers.

Given that this years situation is so special, I dont want to predict the future prospects. With the further recovery of the global economy, customers demand for overseas education, investment and asset diversification is still huge. Therefore, there are good reasons to believe that when international travel returns to normal again, the demand and transaction volume of Australian property market will further increase.

Palier holds a similar view, saying that as long as the epidemic subsides and travel is no longer restricted, buyers will return soon, and in the long run, Australias appeal will not be diminished by the epidemic. According to Michelle cielski, head of Australian housing research at Knight Frank, an international real estate consultancy, low population growth and high unemployment remain major challenges for the Australian real estate market in the coming months. It will not be until the second half of 2021 that housing prices in the countrys major cities are likely to rise, she said According to a new survey of real estate analysts, average Australian housing prices are expected to fall by 4.5% and 2.8% in the next two years, and it is not expected to return to the upward trend (+ 3.4%) until 2022. Source: editor in charge of Finance and Economics: Zhong Qiming_ NF5619

Palier holds a similar view, saying that as long as the epidemic subsides and travel is no longer restricted, buyers will return soon, and in the long run, Australias appeal will not be diminished by the epidemic.

According to Michelle cielski, head of Australian housing research at Knight Frank, an international real estate consultancy, low population growth and high unemployment remain major challenges for the Australian real estate market in the coming months. It will not be until the second half of 2021 that housing prices in the countrys major cities are likely to rise, she said