Australia claims the title as the most popular destination in the world for high net worth individuals (HNWI) with more than $1.47 million (US$1m) to invest.
And the figures are set to be higher still for 2023 with a total of 5,200 HNWI expected to arrive, according to the Henley Private Wealth Migration Report for 2023.
The report suggests the source of Australia’s richest immigrants is widening even beyond China and India to include the UK.
There has been debate about tax privileges in the UK post-Brexit, which has created what is called a ‘millionaire drain’ with those HNWIs moving elsewhere with their money.
Although this large influx of the world's wealthiest is nothing new to Australia, with the country consistently attracting sizable numbers of millionaires from around the world, it does represent a recovery from the Covid-19 pandemic era when Australia shut its international borders.
Dr Juerg Steffen, CEO at Henley & Partners, says there’s been a steady growth in millionaire migration over the past decade, with global figures for 2023 and 2024 expected to be 122,000 and 128,000, respectively.
“In general, wealth migration trends look set to revert to pre-pandemic patterns this year, with Australia reclaiming the top spot for net inflows as it did for five years prior to the Covid outbreak, and China saw the biggest net outflows as it has each year for the past decade. The notable exceptions are former top wealth magnets, the UK and the US.”
What does this mean for Australia’s property markets?
The data comes at a time when Australia’s property market is already tight.
As we know, the property market in Australia will always be supported by strong demand and low supply.
In early 2023, we saw the property downturn of 2022 quickly stabilise thanks to consistently low advertised supply levels and a rise in auction clearance rates, keeping a floor under prices.
And another influx of more migrants, particularly those with the money to invest in the Australian property market, would put further strain on short supply and prevent prices from falling further even in the face of rising interest rates and tighter borrowing requirements.
Overall, Australian capital dwelling prices increased by 1.2% over the past 28 days yet are still -5.1% lower over the last 12 months.
And it’s only likely that property prices will keep rising over the remainder of 2023, and increase further throughout 2024.
Ray White chief economist Nerida Conisbee told The Australian that premium suburbs are now leading the recovery in prices, perhaps in part due to these high levels of wealth entering the country.
She also suggests that very wealthy arrivals in Australia may now start to expand their property searches beyond the traditional targets of Sydney and Melbourne.
“If you are looking at an international property buyer who is not sensitive to interest rates and, for example, they have been looking at London prices and then they are assessing value in Queensland, they may well view it as a bargain” - she said.
Continued crisis in our rental market
Given the imbalance between supply and demand, it is unlikely there will be much relief for renters over the short to medium term with stock levels unlikely to increase substantially anytime soon.
Net migration is forecast to remain strong for some time yet and this will only add further upwards pressure on rental values.
Tenants coming up against affordability constraints have limited opportunities and unlike homeowners can’t borrow to pay rent.
It’s likely some tenants are now sacrificing the spare room or home office and re-forming share houses that disbanded throughout COVID in order to share the rental burden.
Those who have the financial means to pull together a deposit might be taking the plunge into homeownership sooner while others are locking in longer leases, rather than brave the hunt for a new rental.
A final note to investors…
Australia’s robust property market, low supply and a soon-to-be sharp pick up in demand thanks to new overseas arrivals means Australia’s property market will continue to be robust while our rental market will continue in crisis.
The good news is that current data shows there is still good value in our property markets.
At Metropole, we always advise on the importance of investment-grade properties and locations, rather than chasing a hotspot or growth area.
That’s areas and properties which hold their value over the long term, rather than benefit from an uptick in demand.
But even before looking for the right location, make sure you have a Strategic Property Plan to steer you through the upcoming challenging times our property markets will encounter.
Because aside from remembering that you should focus your efforts on investment-grade properties and locations, you also need to remember that property investing is a process, not an event.
That means that things have to be done in the right order – and selecting the location and the right property in that location comes right at the end of the process.
And that’s because what makes a great investment property for me, is not likely to be the same as what would suit your investment needs.
