The recent influx of overseas immigrants is a result of an almost two-year closure of Australia's international borders during COVID.

As a result, Australia's property market is experiencing a major, if temporary, flood of new residents, all needing somewhere to live.

Australian Bureau of Statistics (ABS) figures show Australia’s population increased 2.5%, or by 660,000 residents, in the year to September 2023 to reach 26.8 million.

Net overseas migration grew by 60%, or 548,800 people, in this period and drove 83% of the annual population growth.

Internal migration (the movement from one part of Australia to another) has also had a key role in COVID's impacts on real estate, according to CoreLogic.

These changes have driven the country's current high home values and rents further upward.

Or have they?

Let's take a look.

Migration hotspots

A CoreLogic report in April 2024, based on ABS figures, revealed the country's top 10 SA2 regions (mid-sized areas with a population of 3,000 to 25,000 people) for net migration growth in FY2023, and the effect of this change on property prices and rent values.

While, unsurprisingly, all of these areas were located in Sydney or Melbourne, head of research Eliza Owen also noted that most of these areas' migration numbers were due to internal - rather than overseas - migration.

"Internal migration accounted for around 90%+ of the migration to six of the top 10 regions," Ms Owen said.

Melbourne's number one area for overseas and internal migration - and the highest spot for such growth in the country - was Rockbank and Mount Cottrell in the west, welcomed an additional 15.9%, or 3,662, residents in FY2023.

Rents lifted 7.2% but property prices dropped 4.9%.

In Sydney, Box Hill and Nelson - also in the city's west - claimed the number one spot for migration, with a 24.3% jump, or 3,530 new residents, in FY2023.

Rents increased by 2.1% but again, property prices dropped -2.2%.

Outside of Sydney and Melbourne, migration numbers were highest in Brisbane's Chambers Flat and Logan Reserve regions, on the city's southern fringe.

This market did have a notable uplift in rents (9.6%,) but this was only fractionally above the Greater Brisbane annual rent growth of 9.4%.

Overseas vs internal migration

In all of the above areas, internal migration figures far outpace overseas ones.

Ms Owen believes this result is due to "urban sprawl", with fringe areas attracting "a fresh wave of demand from upsizers and family home buyers".

High internal migration areas also haven't experienced strong increases in rents or home values.

"This is likely because the fresh housing supply in these areas is determining the population growth and not the other way around," Ms Owen said.

However, it's a different story for areas experiencing high overseas migration - such as Melbourne CBD's north and south suburbs - especially when it comes to rental markets.

"Given that over 90% of net overseas migration to Australia in the year to September 2023 were temporary migrants, there could be an even higher portion of recent migrant arrivals skewing to rentals than usual," Ms Owen said.

Migration is not (necessarily) the enemy

Other groups have also expressed doubts about the connection between high migration numbers - both internal and overseas - and increasing property prices and rental values.

In January 2024, an article from property investment group, Ironfish, noted that several factors contributed to the "complex dynamics" of housing supply and demand, including interest rates, land availability, construction costs, government policies and investor activity. 

"Each of these elements intertwine to shape the intricate landscape of the Australian real estate industry, influencing trends, prices, and opportunities," the article stated.

At the same time, Ironfish acknowledged that high migration numbers were "propell(ing) the already high demand for housing, especially in the rental market".

Ironfish added that an Australian Housing and Urban Research Institute (AHURI) study recently found that one-third of rental prices increased over the past two decades were due to migration.

At the same time, such figures present excellent opportunities for property investors, said Ironfish.

"Rental yields are high in the major cities due to the demand from international students and skilled migrants (and) this has attracted many investors, both domestic and foreign, to enter the market," the article noted.

Yet as Listing Loop also discussed earlier this year, there are plenty of other factors in play when it comes to Australia's rental market issues, with a major one being investors fleeing the market.

And, there's also far more to migration concerns in and around the property market than meets the eye.

Ms Owen said the initial "demand shock" following the re-opening of international borders was heightened by rising interest rates and housing supply constraints and delays, including increased material costs and labour shortages.

She added that another major post-COVID housing factor is that of household changes with a sharp reduction in the number of people per household early in the pandemic adding to dwelling demand by around 120,000 households.

"Longer term, other factors have contributed to smaller household size on average, such as the ageing population and falling marriage rates," Ms Owen said.

Migration bans

In a November 2023 report, Ms Owen highlighted that a possible migration ban, or cap, was not a long-term answer to high rental values.

A good example of this is the COVID migration ban which only created a volatile rental market.

Ms Owen added that even limiting temporary migration would be difficult to implement and would result in economic trade-offs.

Ironfish agrees, and notes migration's "contribution to Australia’s economic growth" including filling skill shortages in industries such as healthcare and hospitality, especially in the long term.

Key takeways

While Ms Owen acknowledged high migration levels can have a multitude of impacts on housing markets, other factors such as supply and affordability should also be taken into account.

"The only migration-housing performance relationship demonstrated in the data over the short term - and weakly at that - continues to be between overseas migration and rents," she said.

Ms Owen added that limited borrowing capacity had resulted in some fringe areas of Perth, Adelaide and Brisbane enjoying high numbers of internal migrants - and thus attracting value growth.

However, value growth due to internal migration isn't always guaranteed but could simply be a result of urban sprawl, more balanced levels of supply or the timing of off-the-plan purchases. 

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