Overseas immigration is driving up rents and the impact is being most felt in inner city Melbourne, according to new data.
According to CoreLogic, the areas that saw the highest levels of net overseas migration also saw rents surge up to 29 per cent in the 22/23 financial year.
Overseas immigration was the highest in Carlton, the Melbourne CBD – North and Melbourne CBD -South, with rents surging in all three areas.
In Carlton, 3722 overseas immigrants arrived in the 2022/23 financial year, leading to rents increasing 18 per cent.
Total migration as a percentage of the population in Carlton was 18 per cent over the period.
The Melbourne CBD – North also experienced a surge in overseas arrivals, with 3043 immigrants moving to the area leading to rents increasing 28.9 per cent.
While Melbourne CBD – West saw 2598 immigrants move into the area with rents jumping 25.2 per cent.
Head of Research Australia at CoreLogic, Eliza Owen, said there was a clear correlation between overseas immigration and rising rents.
She said most new immigrants rent and this had put the rental market under extreme pressure in inner city areas.
“The biggest short-term impact in areas that experience a rapid influx of overseas migration is in the rental market, with research from the ABS suggesting around 60 per cent of recent permanent migrant arrivals rented in Australia in the five years to 2021, and census data in 2021 showed around 65 per cent of temporary migrants were renters,” Ms Owen said.
“Given over 90 per cent 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.”
Total migration numbers were high in Rockbank – Mount Cottrell, Fraser Rise – Plumpton and Mickleham – Yuroke in Melbourne,
While Box Hill – Nelson, Marsden Park – Shanes Park and Schofields – East in Sydney also had high levels of migration.
Outside of Sydney and Melbourne, migration numbers were highest in the Chambers Flat – Logan Reserve region of Brisbane.
“This market did have a notable uplift in rents through the year of 9.6 per cent, but this was only fractionally above the Greater Brisbane annual rent growth of 9.4 per cent,” Ms Owen said.
“Chambers Flat – Logan Reserve is another region with pockets of new housing development, and rose through the ranks when it came to the number of migrant arrivals, up to 17th highest nationally from 24th position in the year prior.
She said Alkimos – Eglinton, in Perth’s North West, had the highest total migration of any market in Perth.
“This was comprised mostly of internal migration (75 per cent), but also a decent uplift in net overseas migration,” Ms Owen said.
“This coastal region is towards the northern fringe of Greater Perth, offering an exceptional combination of lifestyle and affordability with a median dwelling value of $511,000 at June last year.”
According to CoreLogic, most of the internal migration to Melbourne’s West comes from the Melbourne – Inner region, and the North West of Melbourne.
Ms Owen said this may represent people upsizing from smaller and/or rented property in more central locations, to detached houses that are relatively affordable.
She said in the same period, rent values rose 7.2 per cent in Rockbank – Mount Cottrell, but this was well below the broader uplift in rents in the Greater Melbourne market, which was 11.3 per cent in the same period.
“Other top migration hot spots had similar characteristics where the change was largely explained by internal migration. Box Hill – Nelson, Marsden Park – Shanes Park and Fraser Rise – Plumpton are all examples of ‘urban sprawl’, set on the fringes of Sydney and Melbourne, and attracting a fresh wave of demand from upsizers and family home buyers,” she said.
“None of these areas with high internal migration saw a particularly big pick up in rents or home values in the same period.
“That’s likely because the fresh housing supply of these areas is determining the population growth, and not the other way around.
“Off-the-plan house purchases likely mean that buyer demand in the suburb was spurred before people moved to these areas.”
Ms Owen said affordable markets on the fringes of Perth, Adelaide and Brisbane have attracted an increasing share of internal migration, rising through the ranks of migration hot spots, and attracting value growth.
“However, in some areas associated with urban sprawl, home values have not risen strongly at the same time migration volumes have been high, and may have to do with more balanced levels of supply, or the timing of off-the-plan purchases,” she said.
