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Returning expats may increase property prices

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Returning expats may increase property prices

by Sam O Connor 23 November 2020 1 minute read

Demographic experts forecast we are due for a “migration tsunami”, which will lead to extremely high housing demand.

Returning expats may increase property prices
November 23, 2020

There’s no escaping the monumental consequences we’ve experienced throughout COVID-19. From the devastating impacts on our health, lifestyle, employment, to the border closures preventing us from seeing loved ones. The current global health crisis is a leveller and does not discriminate, impacting every single one of us.

The immediate dialogue around international border closures is the lack of overseas travel, but it’s time to look at what the impact of reduced immigration will have on our housing market, and more specifically, on property investment.

2020 has been full of uncertainty and property investors have every right to be on the edge of their seats, yet the Australian housing market has proven to be remarkably resilient, particularly in the last 12 months. While immigration is stagnant and vacancies have slightly increased, we are now seeing an unanticipated rise in interstate migration and the emergence of a new trend – the return of the Aussie
expat.

The return home has already begun for many of the 1,000,000 Australians who live and work overseas, with hundreds flying home each week. Returning expats can now return home even sooner under the government’s expanding quarantine processing in Darwin, set to process around 1,000 expats a month.

Over 480,000 Australians have already returned home in the last year, the majority due to the global pandemic – and the Department of Foreign Affairs and Trade has revealed that there are over 36,000 Australian residents who have registered interest in coming home, with more than 27,000 in the process of returning.

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This is an unprecedented spike in returning expats. According to the ABS, the 2018-2019 financial year saw Australia’s population increase by 239,600 people due to net overseas migration. The amount of returning expats has already exceeded this.

In addition, experts predict that millions of prospective future Aussies are ‘waiting in the wings’ to relocate here as soon as physically possible – seeking to flee countries that are currently home to escalating health or political risks such as USA, UK, Europe, Hong Kong and China.

As a result of these factors, demographic experts forecast we are due for a ‘migration tsunami’ which will lead to extremely high housing demand. With international borders expected to reopen in late 2021, Australia will see significantly less immigration resulting in slower population growth. The Australian
government’s recent federal budget declares that Australia’s overall population growth is expected to grow 0.2 per cent in 2020-21 and 0.4 per cent in 2021-22, yet with this increase in returning residents and the many migrants who are looking to move to Australia imminently, by 2022 there will likely be an overall net increase in residents settling in Australia.

The return of expats, combined with the postponements by those who had planned to leave Australia to work overseas, has already kept vacancy rates low.

Data from October reveals vacancy rates have dropped in every capital city in Australia, apart from Melbourne in the past month.

As more expats looking for somewhere to live after they make it out of hotel quarantine, there is no doubt there will be further pressure on the market – and to further support our housing market, we can look no further than the Reserve Bank of Australia’s (RBA) November announcement.

The RBA’s recent slashing of the official cash rate from 0.25 to 0.1 per cent, a record low, is a welcomed incentive for investors. We can expect to see banks pass this cut directly on to borrowers so investors can breathe a collective sigh of relief with the RBA promising not to hike rates for “at least” three years.

The Commonwealth Bank has also announced its lowest ever fixed rate home loan of 1.99 per cent. Australia’s biggest lender is now offering a new four-year fixed rate for owner-occupiers paying principal and interest. This is great news for investors as this will lower the structure of interest rates and provide confidence that Australians can borrow over the long term at record-low rates.

The good news continues for investors with the most recent CoreLogic dataset revealing that house prices across Australia have finally risen overall for the first time since the start of the pandemic, with the national housing market experiencing a 0.4 per cent rise in October.

While we are not out of the woods yet, there is every reason to feel confident about the outlook for property investment. The economic picture isn’t as bleak as initially predicted and we can take comfort in the fact that as our expats return home (and why the bloody hell wouldn’t they?!), demand for residential property will continue to grow.

Investors need to be ready for a migration tsunami and snap up solid investment properties while they can. With the ongoing changes that we’ve experienced this year, it is essential to do your homework and seek expert advice and property management to ensure you make smart and rewarding financial choices in 2021.

Returning expats may increase property prices
Returning expats may increase property prices
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Sam O Connor

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