The second half of 2022 has been about things getting back to ‘normal’ – at least the post-pandemic version of normal.
Normal can be frustrating at times. It means no more record low interest rates. It means having to deal with crowds again.
But normal also means people from overseas coming to Australia again.
International borders fully re-opened on 21 February this year, and it’s been a gradual build back to the 2019 levels of international travel.
The Australian Bureau of Statistics this week reported that 40,000 people are arriving in Australia each month for migration purposes. For perspective, those numbers are in line with the rate of migration to Australia in 2019 (i.e., before the pandemic).
There were just 1000 to 2000 people arriving in Australia each month throughout all of 2020 and 2021.
A similar trend is emerging when it comes to international tourism into Australia.
Circa 370,000 people came to Australia for holiday purposes in September.
That’s not quite back to 2019 levels, when 700,000 people were arriving each month. But it’s up significantly on the 2000 per month that were arriving before the pandemic.
As a result, hotels are running at their highest level of occupancy since February 2020.
These numbers are positive. Hospitality-wise it’s positive for the hospitality workers and businesses that were decimated throughout the pandemic. Positive for employers struggling to fill jobs. Migration-wise it’s positive for the many households and businesses struggling to find tradespeople. Positive for the many consumers and businesses who have struggled with supply chain challenges through much of 2022.
Then there’s the property market. Population drives everything when it comes to the property market.
As a population grows, so does the demand for housing because a roof over our head is one of the most important expenses in any household’s budget.
At the same time, Australia is experiencing the biggest shortage of housing we’ve ever seen.
The vacancy rate in Australia is just 1%, down from 1.9% this time last year.
Because of the lack of supply, advertised rents are going up at a rate of 2% (24% per annum).
It’s hard not to see that trend continuing for the foreseeable future. While it’s terrible news for renters, it neutralises the effect of increased interest rates for investors.
I think what we are seeing in the rental market today offers a glimpse of what’s to come in the short to medium term for house prices.
Reason being is that migrants arrive to Australia and rent a home, before eventually buying a home to live in.
Of course, you should always take a long-term view when making any investment, particularly property. However, I think we will see another run in the housing market sometime during 2023 or 2024.
Australia is a safe place, with great weather, a world-best healthcare system and a strong economy. That’s why so many people want to come to Australia; before the pandemic and even more so now as lifestyle becomes increasingly important post-pandemic.
As our population grows, it will be important keep housing affordable. The way we will do that is by being more efficient and innovative with how we use our land.
Australia houses 0.3% of the world’s population but has 1.5% of the world’s land mass.
Most importantly, being back to normal is a good thing.
