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By Michael Yardney

Overseas migrants return: Here’s what it means for our property markets

Australia’s unit market struggled to keep up the pace with the housing market amid the Covid-19 pandemic boom as closed borders halted incoming migrants and local dwellers vacated their city apartments in search of more space in lifestyle suburbs further away from the city centre.

But now the pandemic lockdowns have eased and our international and domestic borders have reopened creating a shift in demand across all our property markets.

In its latest research, Charter Keck Cramer has unpacked the ABS 2021 Census of Households and Population and explored overseas migrant dwelling patterns upon arriving in Australian cities.

It is these patterns that help us understand what is happening and creates opportunities for developers and investors to respond to new dwelling demand (driven by net overseas migration) in the right way.Migration

Here is what the research found.

Renting trends driven by overseas migrants

The following chart gives a breakdown of the dwelling patterns of overseas migrants when they come to Australia through the first 22 years of residing in the country.


The above chart shows that for combined Australian capital cities, around 70% of overseas migrants enter the rental market upon arriving in Australia.

But interestingly the trends do differ significantly for each city - entrants into Sydney for example, are much more likely to be in the rental market and/or the apartment market for longer than those who arrived and moved to reside in our more affordable cities such as Perth or Adelaide where house prices are more affordable and suburbs aren’t as densely populated with units.

The following charts from valuers Charter Keck Cramer then give the breakdown for each city showing that the tendency to rent is highest in Sydney (76% renters) and lowest in Perth (62% renters).

It’s clear from the data that the rental market is acting as an initial outlet for many overseas migrants as they arrive and then begin to settle in the capital cities across Australia.

“Given net overseas migration is returning much faster than anticipated, and at a time where there is a current chronic shortage of rental dwellings, it is no surprise that there is a rental crisis across all Australian capital cities at present,” Richard Temlett director of Research & Strategy at Charter Keck Cramer said in his report.

Here’s the breakdown for each major Australian city.



Apartment trends are driven by overseas migrants

The data also shows that around 36% of migrants enter the apartment markets upon arriving in Australia, particularly in Sydney where 56% of migrants occupy apartments in contrast to Perth with the lowest percentage at just 18%.

This underscores the fact that Sydney is the most mature apartment market in Australia and reflects the fact that apartments are more affordable to rent or purchase than townhouses or detached houses, and are often located close to amenity and employment opportunities.

Apartments are also acting as an initial outlet for many migrants as they arrive and establish their lives across Australian cities.

House trends are driven by overseas migrants

Around 49% of overseas migrants enter the detached housing markets upon arriving in Australia, according to the data.

This is highest in Perth (where 67% are house occupiers) and lowest in Sydney (33% are house occupiers).

“It is evident that many overseas migrants target detached housing as an aspirational housing type,” Temlett said.

“Melbourne and Brisbane have large greenfield (house and land) markets which are catering to this demand, whilst Perth and Adelaide are simply more affordable housing markets than the east coast cities.”

Transition from renting to owning and from apartments and townhouses into the detached housing market.

What is interesting is that there is a consistent transition from renting into owning and from occupying apartments and townhouses into detached houses in the 20 years from the date of arrival.

But the greatest proportion of migrants takes around 4-7 years from arriving in the country to make the transition, no matter what capital city they live in.


Trends in overseas-born vs Australian-born occupiers

Longer-term migrants living in Australia’s capital cities are +7% more likely to be occupying apartments (as renters or owners) compared to their Australian-born counterparts - a trend that is most pronounced in Sydney where overseas-born migrants are +10% more likely to be occupying apartments.

Do apartments make good investments? The Charter Keck Cramer view

It is Charter Keck Cramer’s view that the majority of the apartment stock that has been delivered to date across Australian capital cities is primarily investor-grade product, Temlett said.

“The apartments are small, many are poorly built, lack ventilation and light and there is little (if any) amenity in the development.

“Furthermore, the current fragmented private rental market experience is often unsatisfactory.

Left with no other alternatives, many renters simply tolerate this experience.”

He noted that over 35% of overseas migrants start off in apartments (with the majority of this proportion renting) and while many do ultimately aspire to enter the detached housing market, it is highly likely that the current stock of apartments, and existing rental experience, is also compelling occupiers to seek superior accommodation in the detached housing market.

Temlett adds that the opportunity for apartment developers over the next decade needs to be in delivering a product, and rental experience, that captures a greater market share of this net overseas migration demand and also retains a higher proportion of this share for longer.


Better quality owner-occupier apartments, specifically larger ones with more storage space, better amenities, or more outside space.

Essentially the focus needs to be on customer service to give secure longer-term rental accommodation.


My view

I agree with Charter Keck Cramer, that many of the apartments built over the last decade are “investment stock” – they were built to sell to investors, mainly overseas investors, and they are not what I would call investment-grade properties.

I’ve always suggested avoiding new apartments in large complexes as investments because they lack owner-occupier appeal and scarcity.

However, after spending years in the shadow of extraordinary house price growth, units (especially family-friendly established apartments) now look to be having their moment, holding up much better at a time of rapidly rising interest rates and falling house prices.

Housing affordability will get worse as repayments become more expensive, and with the cheaper price point the apartment market offers, units are likely to continue to hold up better in the short term.

However, affordability constraints, shrinking budgets, and the value units offered are all helping to prevent apartment buyer demand from falling as fast.

In fact, buyers are once again trading space for place.

They want to live in desirable neighbourhoods and are prepared to live in apartments, townhouses, or villa units rather than move further out.

More affordable sectors of the market are also insulated by demand from first-home buyers utilising government support schemes.

The cheaper price point of units provides a more accessible entry to the market, and if the proposed Help to Buy scheme is implemented, there will be a lot more choices under the proposed price caps in the apartment market.

The same is also true for the extended Home Guarantee scheme.

Remember: Focus on investment-grade property

The important thing for investors is to focus on the investment-grade property rather than the price point.

‘Cheap’ property will always be ‘cheap’ so don’t get lured into thinking you’re getting a bargain.

Moving forward, it is likely that house prices will grow more than apartment prices over the next couple of years, however, well-located townhouses which have their own significant land component will make excellent investment properties and are currently in strong demand by many first-home buyers who are being priced out of the housing market.


The bottom line

Townhouses, villa units, and the right types of apartments will be great investments over the next decade, especially considering the current affordable entry price.

My advice to investors is to avoid:

  • Packed high-rise towers and apartments
  • Locations right in the thick of the CBD – they’re over-supplied and have low growth drivers.
  • Highly-featured complexes with lots of shared spaces that are expensive to maintain, like lifts, pools, and gyms

Instead, I suggest you look for larger apartments and units in middle-ring suburbs, which are close to good schools, parks, and cafes.

Throw in some good public transport links, and you’ve got the ideal investment for the Australian family of the future.

About Michael Yardney Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media.

What do you consider "large apartment unit" in terms of floor area and "middle-ring suburbs"? Thanks

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