Banner’s Chief Lending Officer Nick Lakin was featured in Sourceable to provide his views into how rising immigration is set to reshape Australia’s property market and the potential housing options that can assist the property industry’s supply and demand issues.
By Nick Lakin, Chief Lending Officer at Banner Asset Management
After almost three years of travel restrictions and closed borders, Australia opened back up in February 2022, inspiring a 1.6 per cent population growth by the end of the year. As the country’s population soared past 26 million, the housing market became even more competitive than before, and we can see increased immigration as a key factor in this uptick.
The surge in overseas arrivals is drastically reshaping the housing market. With the nation’s capitals expected to attract most internationals, there is huge demand for high and medium density living, but with the national vacancy rate sitting at just 0.8 per cent, finding somewhere to live is likely going to be an uphill battle.
With the number of international students rising to pre-pandemic levels and sought-after skilled labourers arriving to Australia from all around the world, it is the nation’s CBDs, namely Sydney and Melbourne, that are putting up the most no vacancy signs.
For supply to meet demand, the property industry must seek to endorse new housing options that directly address this uptick in immigration.
At the beginning of the year, the total number of international students in Australia rose to 546,678 – 26 per cent more than the same period last year – according to the Department of Education. Such a boost in population around central university campuses adds further pressure to CBD vacancy rates.
Student accommodation in Australia is in high demand. With most purpose-built dwellings at capacity, many students are having to navigate a tight rental market with no guidance from university officials. In response to this, investors are seeking exposure to purpose-built student accommodation as an avenue for high yields.
By endorsing and developing suitable housing solutions, the industry can alleviate the pressure on CBD vacancy rates and ensure that the needs of the growing population are met.
Higher density and higher approval rates
Middle ring suburbs maintain their popularity due to the existing infrastructure and amenities they have in place. With high diversity and great liveability, international arrivals in Australia can see these areas as a natural starting point for housing searches.
By focusing on high-density developments in these areas, the property industry can optimise land use and make the most of the available infrastructure, while creating more housing options in these high-demand suburbs.
However, to address this demand efficiently, it is crucial for state and local governments to collaborate closely. Lengthy council approval processes pose a significant barrier to getting housing approvals off the ground. To overcome this challenge, substantial reforms are needed to streamline and expedite these processes, ensuring that housing developments can proceed without unnecessary delays.
One proposed solution for addressing the backlog of planning applications is the intervention of the State government. In Western Australia, some applications that are held up at a local level can be overhauled by the state, a move that has been met with mixed feelings.
Another after-effect from the pandemic, former office space around the nation’s CBDs are sitting empty. We’re seeing developers look to these vacant buildings as a prospect to create residential projects in sought after middle ring suburbs through the growing trend of adaptive reuse.
By converting this office surplus into residential units, developers can avoid building infrastructure outwards, which can be up to four times more expensive in greenfield sites and instead help breathe new life into underused buildings.
The Victorian Government’s metropolitan planning strategy sets forth an ambitious goal of constructing 70 per cent of new homes in established suburbs by 2051. This strategy aims to foster affordable and compact city living that directly addresses an uptick in population.
Adaptive reuse could be a great solution to fast-track the construction of new dwellings and create more options for international students and migrant workers.
Australia’s surge in international arrivals after the pandemic can ultimately be part of the solution, helping to alleviate pressures on essential workforces such as healthcare, agriculture, and construction. By endorsing and developing appropriate housing solutions such as student accommodation, or converted office spaces, the property industry can address CBD vacancy rates and meet the needs of the growing population and new arrivals.
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