Australia’s immigration numbers are surging to never-before-seen levels, and now new data has found that rents across Melbourne are rising rapidly as a result of the influx of people.
CoreLogic found that inner-city Melbourne, in particular, was the hardest hit by record immigration, with rents rising as much as 29% in 12 months thanks to overseas arrivals.
Most of the overseas immigrants landed in Carlton, the Melbourne CBD – North, and Melbourne CBD – South.
In Carlton, 3,722 overseas immigrants arrived in the 2022/23 financial year, leading to rents increasing by 18%.
Total migration as a percentage of the population in Carlton was 18% over the period.
The Melbourne CBD – North also experienced a surge in overseas arrivals, with 3,043 immigrants moving to the area, leading to rents increasing by 28.9%.
Total migration as a percentage of the population for the Melbourne CBD – North was 18% over the 12 months.
While Melbourne CBD – West saw 2,598 immigrants move into the area, with rents jumping by 25.2%.
This represented 15.1% of the total number of people in the area.
According to CoreLogic, the highest migration location in the country was Rockbank – Mount Cottrell, which is on the western fringe of the Melbourne metropolitan region.
In the year to June 2023, the area saw 3,662 people added to the population through net internal and overseas migration. Rockbank – Mount Cottrell was also the highest migration area in Australia in the previous year.
The area has seen rapid development of new housing stock over the past few years, with CoreLogic estimating housing stock in the region more than doubled over the five years to June 2023.
CoreLogic said that the biggest short-term impact in areas that experience a rapid influx of overseas migration is in the rental market.
Research from the ABS suggested around 60% of recent permanent migrant arrivals rented in Australia in the five years to 2021, and census data in 2021 showed around 65% of temporary migrants were renters.
Given 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.
Notably, despite the fact that rents surged during the 2022/23 financial year in these inner Melbourne locations, prices didn’t go up.
Property prices were modestly lower across the three inner-city areas that experienced the big intake of immigrants. However, Melbourne property prices were also weak during that period of time, due to the rapid increase in interest rates from the RBA.
For Melbourne locations that experienced high internal migration, the impacts weren’t as extreme as high overseas immigration areas. According to CoreLogic, none of the areas with high internal migration saw a particularly big increase in rents or home values.
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.
The takeaway for Melbourne investors is that there is a clear positive relationship between surging overseas immigration and rising rents. Locations with tight rental markets and strong population numbers are likely to continue to see rents continue to rise in the short term.
