After almost two years, international borders are finally reopening on 21 Feb 2022. Students, temporary migrants and tourists will now have the opportunity to come back in this beautiful country. With the robust covid management plan, Australia has established itself as even better place to live and this will further boost the migration into the country.
The border was closed to non-residents on 20 March in 2020, and all returning residents were required to quarantine in state-run hotel facilities from 27 March. From 900,000 temporary resident arrivals in Jan 2020, it came down to Zero in March/ April 2020. The closure of temporary migration caused horrendous impact on two sectors: tourism and education.
International students were a large share of Australia’s temporary migrants, but none came during the pandemic. While the student migration graph was on year-on-year incline in pre-pandemic days, touching almost 350,000 student migrants in 2019; last two years recorded a figure of Zero.
Due to the international border closure, Australian Real Estate saw a drastic impact on Rental Market, especially the CBD and inner-city suburbs. This is because the recent migrants are more likely to live in the inner-city than in outer metropolitan suburbs or regional areas. Many of these inner-city areas have recorded falls in rent during the pandemic.
Australia is a world-leading tourist destination. Our tourism sector contributes $152 billion to our economy, supports more than 300,000 businesses and employs more than 660,000 Australians. With no tourists over the last 2 years and almost nil mobility, this sector was the worst affected. It was hard for businesses to survive and many lost their jobs. The only mantra was ‘stay afloat somehow, till this period gets over’.
Despite the adverse global conditions, Australian real estate market not only stayed sturdy but grew exponentially over the last two years. With record-low interest rates, higher dispensable income due to lack of mobility and international travel and various government stimulus packages the Australian Real Estate has broken all previous records.
Now what does the future holds for Australian Real Estate? What does the borders re-opening signify? Will the property market see an incline or decline?
Here are some of the points to ponder:
- With students & temporary migrants coming back, the rental market will gain strength. Vacancy rates should go down and especially in the CBD and high growth areas which caters to large working population and students.
- There could be demand & supply mismatch over time, meaning lower vacancy rates, and this could lead to an incline in the rental values.
- With demonstrated capabilities of the Australian government in covid management, immigration into the country will see an uptake.
- Lower vacancy rates and higher rental will boost the investor confidence resulting in more sales.
- With hospitality and tourism related businesses coming back in shape, due to the tourism inflow, there will be better income opportunities for these people. This could result in this segment getting into real estate investing, an opportunity they probably missed during the hard times.
- Work-from-home may slowly phase out, due to the government recommending businesses to start operating in pre-pandemic days to revive the business districts. This would mean more traffic and business opportunities for the café/ restaurants and retailers.
What may be of extreme relevance is the study of high growth areas. There will be some suburbs that will show better performance over others. With house prices at its highest, whether it still makes sense to invest in a house or look at apartment options. Will the high-density suburbs out-perform the upcoming suburbs, is something to look out for?
All these factors indicate that there needs to be a change in the way of real estate investing. While over the last 2 years, every investor made substantial gains in the property market, it may not hold true going ahead. The investors will need to back their buying decision with considerable research. There could some asset classes out-performing others; some suburbs performing better than their counterparts. And an investor needs to be aware of the reason for this difference. An ignorance here could lead to serious financial losses.
While the next couple of years looks quite interesting for Sydney real estate due to increased infrastructure spending by the governments, and most of these projects expected to see light of the day in coming 2-3 years, the investor needs to evaluate the impact of these and many other factors while making a sound investment decision.
At Home Strikers, we present to you the locations with strong fundamentals for growth. This is based on our extensive research on multiple factors – infrastructure commitment, government spending, projected population growth, demand & supply in the micro-market, private investment commitment by the large players and demographics of the suburb. We manage a diverse portfolio of real estate services to help our clients’ get their dream home that is not only modern and luxurious but also presents a decent return on investment.
