While a looming housing crisis casts a shadow, Australia's population growth also presents significant opportunities for a proactive and well-equipped mortgage broking industry, according to a Sydney-based mortgage broker.
On January 24, 2024, Australia reached a new milestone: the ABS population clock ticked over to 27 million.
This came after Australia's population grew by 2.2% to 26.5 million people between March 2022 and March 2023, according to recent ABS data – the highest growth since 2008.
Largely driven by record high net overseas migration after the reopening of international borders, 454,000 people were added to the population in the past year, compared to the pre-COVID decade average of 217,000
But while migration has its economic benefits, namely fuelling GDP growth and keeping Australia out of recession, the necessity to house this population boom brings with it challenges – particularly with housing affordability hitting record lows.
However, it’s not all doom and gloom, according to Alex Veljancevski (pictured above), director of Sydney brokerage Eventus Financial.
“By focusing on client-centricity and embracing evolving demographic dynamics, brokers can do our part and thrive in this exciting, albeit complex, chapter of the nation's story,” Veljancevski said.
While net overseas migration is expected to decline back to around pre-pandemic levels over the next couple of years, Australia’s population is still expected to grow over the next decade – at the national, state, capital city and regional levels.
Published in late-December last year, the government’s 2023 Population Statement projected Australia to have 30.9 million people residing in it by June 30, 2034.
“Assuming that this growth will be primarily driven by migration (as it is currently) and an average of 2.5 people per household, Australia will require approximately 1.72 million new homes to accommodate everyone,” said Veljancevski.
Fortunately, the government has a plan – the National Housing Accord, which promises 1.2 million new, well-located homes built in five years starting July 1.
This was agreed by states and territories only last year.
Unfortunately, the target is already showing signs of strain, with recent building activity data from the Australian Bureau of Statistics revealing only 174,000 dwellings were completed in the 12 months to September 2023.
“If the target kicked in last year, we would already be 65,000 houses behind,” Veljancevski said.
This shortfall highlights a looming issue: if housing supply continues to lag behind the growing population, it could exacerbate the affordability crisis.
“This would make it increasingly difficult for first home buyers to enter the market, especially in metropolitan areas with high migration inflows,” said Veljancevski.
“Additionally, the rental market is likely to feel the pressure of increased demand. New arrivals often initially opt for rental accommodation, potentially intensifying the current challenges in the rental sector.”
However, it's vital to recognise the positive aspects of migration.
“For instance, net overseas migration can bolster the economy by addressing skill shortages, including those in the construction industry, which, in turn, is crucial for easing the housing supply bottleneck.”
While there’s not much the mortgage industry can do to increase the housing supply, the expanding population offers mortgage brokers a mix of opportunities and challenges.
“Naturally, there is the potential for business growth, as increased housing demand will likely translate to more clients needing financing,” Veljancevski said.
However, he said lending to new immigrants would also present complexities, including the need to cater to individuals who might lack a substantial credit history in Australia or have a limited understanding of the local property market.
“As always, mortgage brokers who focus on building strong client relationships and providing tailored advice are likely to prosper in this evolving landscape,” Veljancevski said.
"Let others build the homes, and whether we meet the targets or not, we mortgage brokers will be ready to guide the financing when the demand floods in. Housing is Australia's future, and brokers will be its financial navigators."
