Measuring the immigration effect on property

Cross-posted from Martin North’s DFA blog.

DFA’s property demand model includes permanent arrivals in Australia. The ABS released their latest Overseas Arrivals and Departures to January 2014 recently, and the numbers changed, because they revised their data back to 2004 thanks to an improved methodology used in the Overseas Arrivals and Departures system.

The data relating to migration, rather than short term visits is a driver for our property demand modelling. Here is the picture of net migration. On a rolling average basis, its between 5,000 – 6,000 a month.

Migration1

Looking at where people are from, New Zealand (21%), then India (19%), China (18%) and UK (11%).

Migration6

We can also look at the long term trend by selected countries:

Migration7

We asked about their property plans after 12 months in Australia as part of our household survey. One third have bought property, one third are renting, and a quarter are seeking to purchase.

Looking at property specifically, we used our surveys to track where people ended by buying property, after 12 months in Australia. They are most likely to buy in Sydney (47%) or Perth (35%).

So, by taking this data, and translating numbers of people into households, we estimated  demand for property from migration. This is enough to move the dials in Sydney and Perth.

Migration2

We estimated that over the next three years an extra 900,000 properties will be needed. Of this about 5.6% is driven by net migration.

Migration3

We conclude that migration is a significant factor influencing the demand for property, especially in Sydney and Perth.

Migration5

Note that in in our modelling, we have assumed people who have left permanently may have had property, rather than renting and so will release property back to the market. If we were to look only at arrivals, then more than 12% of demand would be driven by permanent migration.

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Comments

  1. sydboy007MEMBER

    throw in (non) FIRB approved investors and it’s becoming clear just how badly our leaders are selling us out.

    How do we get this into the political debate?

  2. Well at least I can get a Pide at 10pm on a Saturday night. Well worth paying the extra $700k for the basic bogan box. So. Totes. Awesome. Or Amazeballs isn’t it?

  3. Selling housing to foreigners is great its one of the few things we actually can manufacture for “export”

    what is not great is three tiers of government clogging the arteries of land supply. And further more releasing of land where people just don’t want to be.

    I fully welcome foreigners buying housing using existing laws and regulations. Better if they could be directed to only being able to purchase new dwellings but you know we cant implement any clever ideas now.

    Anyway fix land release and you fix the problem. Houses are for living not grandpas retirement fund.

  4. One third have bought, one third are renting, a quarter are looking to buy … and the remaining 8% are living on the street?

  5. “… over the next three years an extra 900,000 properties will be needed.”

    What’s the bet we’ll fall short of providing enough properties? There might be enough apartments but not nearly enough of the accommodation people, especially families want. But then that’s the idea – bring in more people than there are properties to create demand and push up prices.

    “We conclude that migration is a significant factor influencing the demand for property.”

    I think it would be a safe bet that propping up property prices is the sole purpose for bringing in so many immigrants.

    • Increasing aggregate demand with ~300,000 New Australians/year props up the prices of any number of consumer goods, utilities and services, not to mention putting downward pressure on wages.

      I don’t agree that propping up property prices is the sole purpose, not by a long stretch.