The Greek debt crisis is unlikely to have any measurable effect on our economy or financial institutions but may provide a welcome boost to certain sections of our housing market precisely when these might be otherwise exposed to risk.
The Greek economy is tiny by world standards and although its unserviceable debt is more significant, it is not likely to have any impact on Australia, no matter what the final outcome may be.
The only certainty is that the final result will be bad for Greeks.
So what do people do when their savings are at risk, salaries cut, jobs lost and economic unrest marches with political upheaval to create a general fear of the future?
The crisis is likely to lead to an influx of young Greeks making a new start in Australia and overseas migrants have been responsible for some of the most dramatic changes in housing rents and prices that have taken place.
Understanding the effect that this new wave of overseas arrivals may have on property markets is crucial to knowing which areas could provide the best cash flow and price growth potential as well as which ones to avoid.
To find out, we can look at the two periods of highest population growth in our history which occurred immediately after the First and Second World Wars.
The initial cause was soldiers who started families after years away from home.
They were assisted by War Service Home Loans to buy properties and this led to the rapid rise in housing prices shown in Figure 1 from 1918 to 1922 and in Figure 2 from 1946 to 1952 as the demand for homes to buy quickly outstripped the supply.
Now look at the change that occurred from 1922 in Figure 1 and 1951 in Figure 2.
Housing prices stopped rising, but rents started shooting upwards.
The cause of this second rise in demand was different; it was created by overseas arrivals.
Huge numbers of families poured into our capital cities from war ravaged European countries, but with no jobs or access to finance they had to rent.
Although the demand for housing continued to grow steadily during each post-war era, it gradually shifted from purchase demand to rental demand and rents soared as prices started to level off.
This historical perspective shows us that overseas migration causes a dramatic rise in rental demand rather than purchase demand but raises the question – where will this rise in rental demand occur?
Unlike those earlier migration waves which led to the establishment of suburban precincts in Melbourne and Sydney with a pronounced Italian, Greek, Vietnamese or Middle Eastern flavour, the new arrivals from Greece are likely to be well educated younger people with a cosmopolitan outlook.
Although they may choose Melbourne ahead of Sydney or other capitals, because of relatives already living there, they will definitely choose to rent in inner urban, well-appointed units close to employment and recreational facilities such as Docklands, Southbank, Green Square, Ultimo, Haymarket and the Melbourne and Sydney CBDs.
These are precisely the locations most at risk of overdevelopment in coming years, so the arrival of Greek migrants could easily wipe out anticipated rental surpluses that might otherwise have built up.
The Property Power Database indicates that a rise in rental demand of only a few hundred people in each of these inner urban locations would create rental shortages and lead to strong rises in asking rents.
This would then encourage more investment in those areas and lead to price rises as well.
As well as offering a new start to those Greeks who choose to migrate to Australia, the fallout of the Greek tragedy could lead to an unexpected bonanza for housing investors in inner urban areas over the next few years.
- Australian National Library on line Trove facility
- Mitchell Library archives
- Capital City House Price Indexes, 6416.0, ABS
- Housing Australia a Statistical Overview, ABS 1991, 1996, ABS
- Migration and Population Futures, Department of Immigration and Border Protection
- Property Power Database, Property Power Partners
John Lindeman is director of innovative housing market analysts, Property Power Partners. For more information visit www.understandproperty.com.au