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Scott Keck

SmartCompany /

Giving Australia’s new arrivals somewhere to live, work and shop give us 140,000 reasons to be confident about real estate’s future.

Importing prosperity

Australia’s real estate market, particularly the residential sector, is likely to remain buoyant for the medium term. It’s quite simple really: Australia attracted about 140,000 migrants in the past 12 months. In light of the nation’s skills shortage, the private sector and most states are urging the Federal Government to increase the intake to 180,000 within two years. These arrivals are a tremendous economic boost to our nation.

Few are accepted on humanitarian grounds; most have economic substance: they bring skills that afford them entry to the workforce; they have sponsorship or assets. We are effectively importing middle-class citizens and they need housing. In Victoria alone, our share of the immigration intake was 50,000 last year and generated a demand for 28,000 new dwellings, a figure that will be at least maintained in the medium term.

Along with 28,000 new dwellings comes an immediate flow-on to other property: more people means more shoppers, so there is extra demand for retail space at different levels; and for extra offices and warehouses where they work. In the broader picture, this growing population generates increased demand for schools both primary and secondary, tertiary accommodation, hospital and aged-care facilities, not to mention infrastructure including roads and other services. Our immigration prospects are a commercial stimulus for ever increasing investment as Melbourne and other capitals endeavour to cope with their own increasing popularity.

Australia is in a strong domestic economic cycle with low and predictable interest rates, a skills shortage, business confidence, a commodities boom, and proximity to the growth economies of China and India. Although trade deficits, international interest rates, currency and sharemarket fluctuations and a range of overseas events are all of some impact, the effect is more on our external relationships.

Such factors have little influence on the local real estate markets, which are driven by domestic demand, the most significant of which comes from population growth. So it is that simple: 140,000 reasons to be confident. Just imagine the further strength and stability that would flow from increased immigration at higher numbers.

 

To read The Property Investor’s previous blogs, click here.

 

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