PM Scott Morrison Plans to Cut Population Intake, Our Take on it and What it Means for Our Property Market
Australian Scott Morrison plans to cut migration intake to limit the population growth. The reason being is, roads are clogged, buses and trains are full. Not too long ago, there was a plan to settle migrants in regional areas. In a nutshell, at least for the short term, Australian government is planning to limit population growth. What would this mean for our property market since we all know that property market is very much determined by population and jobs?
I personally think that this initiative was somewhat caused by property prices that were so inflated for the past few years especially around Sydney and Melbourne. And yes, according to Australian Bureau of Statistics, over half of permanent migrants were home owners (http://www.abs.gov.au/ausstats/abs@.nsf/MediaReleasesByCatalogue/9E1D0D5CF2DD8892CA2582CD00153953?OpenDocument). So, migration definitely affects house prices.
However, skill shortages is still an issue in Australia. Being too restrictive on migration will not be good for Australian economy. After all, skilled occupations are generally earning good wages, thus, government can benefit from the tax of these workers. And not just that, think about the potential “property crash” when there are a lot less people buying. By limiting migration, there is still no guarantee that the locals will be able to support the economy.
If anything, government needs to ensure that locals are trained to ensure the skill shortage issue is resolved. And the locals themselves need to have the willingness to retrain. Otherwise, limiting migration will only introduce more problems. For businesses that require these skilled workers, if they have to retrain locals, it will certainly incur more costs. And who will pay for it?
In our view, the restriction on migration will have a very negative impact to the economy if it’s imposed too strictly. Until skill shortage is addressed, we can’t see how Australia can benefit from doing it. What we think will actually happen is, the government will be very selective on the type of migrants that are allowed to get in into the country – which actually is a good thing. We want to make sure the migrants are the good quality ones ie. the ones who can support the economy and are actually needed to fill the skill shortage. Those who want to only benefit from the social welfare system such as CentreLink will definitely be restricted from coming.
Therefore, coming back to the property situation, obviously restriction on migration will reduce the number of demands. Thus, price will either be stagnant or even go down. But hey, from our view, prices in Sydney and Melbourne especially are already too expensive anyway. Restricting or not restricting migrants, the property price in our view is already in the non-affordable level. I mean, you’re looking at $850-900k range for a first home buyer! Who will be able to afford such properties?
As far as other states are concerned, places like WA where prices have bottomed, we can’t see how the property market will be affected by the policy.
So, after all, the restriction on migration might actually be a good thing? However, government needs to be smart about it so that only good quality migrants are allowed.
Tommy
