A place to call home

But with Australia’s borders now wide open, hundreds of thousands of overseas migrants and home buyers are looking to settle in Australia and call the ‘lucky country’ home.

As of December 2022, Australia’s population grew to 26,269,359 people, representing an annual growth rate of 1.9 per cent or 496,800 post-pandemic, according to the latest national, state, and territory population data from the Australian Bureau of Statistics (ABS).

Net overseas migration accounted for 387,000 people in the year ended 31 December 2022, an increase of 380,100 people on the previous year (when border restrictions were in place).

The surge in migration has resulted in the fastest growth in Australia’s population for 15 years, according to the ABS, and the population number is expected to grow even further in the coming years.

National population projections for the 2023–24 budget estimates that Australia’s population will reach 26,974,800 by the end of 2023, but that was based on net overseas migration reaching 316,000 (which has already been smashed). In fact, it’s projected that Australia’s population will surpass 30 million by 2033.

Speaking to The Adviser, business development manager (BDM) at non-bank lender Granite Home Loans, Vivian Dong, said investors are looking at global opportunities in a post-COVID-19 world and Australia is a particularly desirable investment destination due to its strong property market and reliable long-term performance.

“In addition, with the borders now opened, we’re seeing a larger than usual wave of Australian entrants – either as new migrants entering the country or expats looking to repatriate,” Ms Dong said.

“Currently, the most sought-after properties for investors are located in metropolitan areas or lifestyle homes for those seeking a sea change.”

The latest Quarterly Report on Foreign Investment (1 January–31 March 2023) released by the federal Treasury revealed that the total number of approved residential real estate investments by the Australian Taxation Office (ATO) rose to 1,447 during the first quarter of the year, up from 1,224 in the preceding quarter.

The total value of those investments during the quarter was $1.6 billion, with China being the largest source of investment for approved residential real estate investment proposal by number and value ($0.7 billion).

Concerns over housing supply

But while a growing population with appetite to buy is good news for brokers, it does place additional pressure on demand for housing, which is already constrained. As such, house prices are likely to keep rising this year.

The latest data from CoreLogic and PropTrack has shown that there have been four consecutive months of price increases since February, with CoreLogic research director Tim Lawless noting the main factor behind the upwards pressure on values was the lack of available housing supply.

New supply has been slow to come online, too. The construction and property industry has been hard hit in the past 12 months, with many home builders filing for insolvency. Moreover, ABS data show that housing approvals were still 10 per cent lower in May 2023 than the same period in 2022.

The undersupply of housing is only set to worsen, too. According to the State of the Nation’s Housing 2022–23 research report from the National Housing Finance and Investment Corporation (NHFIC), the slowdown in supply and increasing household formations are expected to lead to a shortfall of around 106,300 dwellings (cumulative) over the five years to 2027.

But the Institute of Public Affairs (IPA) has estimated that there will be a housing shortage of 252,800 dwellings as a result of an unplanned rise in net overseas migration (over 1.78 million by 2028).

IPA deputy executive director Daniel Wild said the surge in demand from unplanned migration growth “will make housing less affordable for both Australians and new migrants alike”.

AMP Bank senior economist Diana Mousina shared a similar sentiment that Australia’s housing supply is not keeping up with its growing population following record-high numbers of net overseas migration.

The bank’s Econosights – Australian housing shortage report stated housing supply will need to “lift significantly” for the country to be able to respond to the high population growth.

How can brokers best support overseas borrowers and finance?

Since the latest projections show signs that overseas migration will continue to drive Australia’s population higher, mortgage brokers have the opportunity to step up and help overseas buyers find their dream home.

Ms Dong stated that overseas borrowers/buyers may require “more guidance and handholding” when looking to enter the real estate and financial market of a country they’re not familiar with or new to investing in.

Ms Dong recommended that it’s good to start with explanations “from the bottom up” in order to avoid any potential misunderstandings.

“It’s very likely their home country banking system is different to Australia, or the meaning behind terminology may be different to their expectations,” Ms Dong stated.

“Our team at Granite have wealth of information and knowledge about different country jurisdictions to help you along the way.”

Other lenders have thrown their hat in regard to helping overseas buyers or investors find property in Australia, such as Brighten Home Loans launching a home loan product specifically catered to meet the increased demand from brokers with expat clients who are seeking residential lending solutions as a result of Australia’s projected migration climb.

Top tips for brokers who want to write loans to overseas buyers

As well as helping foreign buyers understand the Australian market and available products, brokers should also be mindful that overseas buyers or investors must follow the guidelines from the Foreign Investment Review Board (FIRB). Ms Dong has offered some of her top tips for brokers looking to break into loan writing for these borrowers: