Housing demand created by overseas migration is a strong force, but slowing: Tim Lawless
Population growth is arguably the most important indicator of housing demand. More residents generally translate to a larger requirement for dwellings. Of course there are changes in household formation that need to be taken into account (for example, more people under one roof and maximising existing bedrooms in an effort to combat housing affordability), however population growth remains the most important indicator for housing demand.
Over the first three months of 2013 the Australian population increased by 114,751 new residents; close to a record high (there have only been five previous quarters over the past 30 years where the population has grown by a larger amount). 36% of this population growth was attributable to natural increase (ie births minus deaths) while the majority of new residents came from net overseas migration.
Unfortunately the quarterly demographic updates from the Australian Bureau of Statistics aren’t all that timely; in fact the statistics are about six months in arrears. The most up to date population estimates at a state/territory/national level are current to March 2013 and the June update won’t be available until December 17th.
Fortunately we do have interim data on overseas arrivals and departures which is published monthly and provides a useful indicator for where overseas population growth is heading. Focussing on permanent and long term arrivals and departures data from the ABS, it is clear that overseas migration, while remaining historically high, has already passed the peak rate of growth.
Over the month of August the ABS reported 53,470 permanent and long term arrivals. In balance there were 30,390 permanent and long term departures resulting in a net increase of 23,080 new permanent and long term movements. An annual summation of the overseas arrivals and departures data shows 680,200 arrival movements and 371,440 departure movements; a net gain of 308,760 permanent and long term residents/visitors who require accommodation of some description.
The inflow of migrants remains high; however an examination of the annual trend shows that net migration into Australia has been slowing since commodity prices peaked back in late 2011. The last time we saw the rate of overseas migration falling away like this was in early 2009; a trend which was policy driven in response to a rising rate of unemployment.
Currently, despite the improved unemployment reading for August (the national rate of unemployment shifted from 5.8% in July to 5.6% in August due to a drop in the participation rate) it is widely anticipated that national unemployment will continue to trend higher and is likely to peak around 6.25% according to Federal Treasury. Potentially we will see similar calls for migration policy change if unemployment continues to trend higher.
If the department is correct in their forecasts we should continue to see a strong rate of overseas migration which will continue to fuel the high rate of national population growth. The month to month overseas arrivals and departures data supports the notion that overseas migrants are continuing to grow in numbers, but the rate of growth has moderated since 2011.
Without doubt, as unemployment moves higher we can expect more debate about whether this strong rate of migration is the correct policy for our country.
Personally, I am very much pro ‘Big Australia’ but it is absolutely essential that any population growth targets run parallel with infrastructure development; something that both federal and state government have struggled with in the past. Additionally, migration targets need to be strategically matched with domestic labour shortages and aimed at sectors that will benefit from the rapid ramp up of human resources that overseas migration can provide.
Tim Lawless is national research director of RP Data.