One of the key drivers of housing demand has always been people coming in from overseas looking for a home to buy and live in.
The COVID pandemic has obviously seen that dry up since the international border has been closed but once it opens again there are concerns it will add too much heat to the market, which is now booming again already.
AMP Capital chief economist Shane Oliver told Domain once the border re-opens, it should be done carefully and gradually to avoid this happening.
“You can argue from a point of view of affordability that the best option would be to slow any rise in immigration that will occur with the reopening of borders,” he said.
“So, rather than allow immigration to suddenly jump back to what it was before, a better option would be to gradually phase its return to enable the property market to adjust without becoming even more overheated.
“If we were to allow a return to normal immigration levels then you’re suddenly doubling demographic demand again at a time when the property market is still hot from low interest rates, then that could cause a real problem in terms of adding pressure on prices and worsening affordability.”
It is predicted that net overseas migration won’t return to pre-pandemic levels for probably three years at least, but the National Housing Finance and Investment Corporation still warns that supply will need to respond to that added demand when it comes.
NHFIC CEO Nathan Dal Bon said the current pause to migration is an opportunity to ensure policy frameworks and planning approvals can accommodate future population growth and housing supply without adversely affecting affordability.
“NHFIC’s State of the Nation’s Housing report showed that after a short period – this year and 2022 – where supply is expected to exceed new demand, the situation could reverse and new demand for housing could outpace new supply,” he told Domain.
“The longer-term trends of declining affordability, particularly for low-income households in the private rental market, are likely to persist, particularly if supply does not respond when demand recovers.”