B Invested

Will The Borders Opening Affect The Australian Property Market?

While property markets boomed around Australia over the last year, values were heading north in all capital cities and major regional centres around the country. But there was one section of the market feeling a bit of pressure…inner city property, especially apartments.

When Sydney and Melbourne’s property markets experienced plateaus way back before Covid came around, inner city apartments struggled because there were a lot of off the plan projects starting to filter on and, while houses in the suburbs remained undersupplied, there was an oversupply of new CBD units.

The sheer number of new projects coming on meant that discounted rents were being offered on new apartments, which had a flow on effect for investors holding established apartments- it’s hard to find a tenant for an older property when they can rent brand new for the same price.

So the market was already under some pressure and then….

Lockdown came a knocking

Once pandemic panic gripped the nation and lockdowns began to come into effect, the city markets were dealt multiple blows. With so many people working from home and leaving city offices empty, there was suddenly a major fall in demand for property close to the CBD. This affected both values and asking rents.

The other side of lockdown was that interstate and international workers were no longer able to migrate into the city and many were forced to leave. Compounding this was the departure of thousands of international students…those who were good paying tenants for so many city properties.

Rewards for regions

Of course the flipside was that regional areas benefited from the migration away from the city as people moved to lifestyle friendly areas and continued to work from home.
Regional property values shot up as a result of an influx of city money competing for the property supply on offer there.

Places that usually thrived on tourism were able to get some compensation from the loss of holiday-maker dollars by those who instead permanently moved there.
But, after close to two years of uncertainty, lockdowns are now lifted and the high levels of vaccination in the population make it unlikely that whole states will return to harsh restrictions.

So now what happens?

There was a lot of talk not that long ago about how work places would never go back to insisting people come into the office. However, we do have a pretty short memory and lots of workplaces are at least now committing to “blended” working environments in a post-Covid world.

This means cities are beginning to benefit economically again from commuters and the businesses they support.

And of course, now that more restrictions continue to lift, it’s time to welcome back interstate and overseas migration.

Borders and boarders

International students have already been greenlit to return to Australia and student housing, including city apartments will benefit.

Likewise, foreign workers and travellers on working visas will jet back in and interstate workers will be able to cross state borders too.

Investors may find themselves better placed to attract tenants and at least be able to hang onto their CBD properties.

For those who can’t, there may yet be a chance to purchase for below value in the inner city before renters return and values recover.

And ABS data from September showed that lending to investors had increased by more than 83%, from this time last year to now be at $9.62 billion this year (Australian bureau of Statistics, September 2021). This would suggest investors are already making their move in those markets.

So will the market go up?

Foreign buyers being able to purchase or rent brand new properties will help unit markets at least recover to their plateau point, and as the boom in houses begins to run out of steam in middle ring and regional areas, there will be a value gap between houses and units. And units can then expect a surge in growth as they play catch-up, assisted by continuing low interest rates and competition from buyers who were priced out of houses (https://aus-finance.com.au/gazette/what-will-open-borders-mean-for-sydneys-property-market, October 2021).

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