Expats are forcing ordinary Australian families out of the property market as they cannot afford rising prices, it is claimed.
Figures shows that expats, predominately from the UK, India and China, are increasing in numbers and are snapping up properties and forcing prices upwards to some of the highest levels in the world when compared with average incomes.
Almost 115,000 permanent skilled visas were issued last year, compared with just over 40,000 in 1998 to 1999, an increase of 187%. During the same period, the median house price rose 168% from $156,600 to $420,600.
Although the number of migrants is relatively low compared with total property transactions, which have averaged 500,000 a year over the past 10 years, experts say property price inflation is driven not by what the average buyer can afford to pay, but by the highest bidder.
And because skilled migrants command above average salaries, they are willing to pay above average prices. As a result, a relatively small number of highly paid buyers can have a disproportionate effect on house prices.
Property prices are expected to keep rising. They increased by 4.8% in the three months to December from the previous quarter and will rise by as much as 10% this year, according to Australian Property Monitors.
Data also shows an increasing number of owners are struggling to meet their mortgage payments. Interest rate increases, lack of supply and high land prices are also adding to the problem. About 16% of property owners were struggling to pay loans in November, up from 11.7% in May, according to a survey from the Mortgage Finance Association of Australia.
‘There’s no question the number of skilled migrants is a key factor in driving up prices. You need only two highly paid buyers at an auction to take the price of a property well above what any other party could afford to pay,’ said John Edwards, of property monitor Residex.
Hen has drawn up a chart plotting the increase in expat arrivals alongside national house price growth. ‘It correlates at a rate of 98% which is almost unheard of. It even has an 18 month time lag, which is obviously the period between immigrants arriving in Australia, getting themselves settled and when they first purchase a property,’ he explained.
Coinciding with the surge in expats, the average property in Australia now costs 5.5 times the average household income and about eight times income in costly places like Sydney. This compares with a ratio of 2.5 times household income in the US and five times income in the UK.
Last year, the Government cut permanent skilled migration visas by 14 per cent from 133,500 to 115,000. It has proposed a further cut to 108,100 for 2009-10, a reduction of almost 20 per cent on previous levels but experts warns this could lead to severe skills shortages.