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Rental crisis linked to migration boom

Discussion in 'Real Estate' started by Billv, 26th Sep, 2008.

  1. Billv

    Billv Getting there

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    Australia's biggest migration boom is exacerbating the rental crisis, while house prices are overvalued by between 5 per cent and 15 per cent, the International Monetary Fund has said.

    Immigration added a record 199,064 people to Australia over the year to March - the biggest annual rise in history, figures released yesterday by the Bureau of Statistics show. This surpasses the boom after World War II, which peaked at about 149,000 people in 1950.

    "The inflow of migration is putting pressure on the housing rental market," the IMF said in its latest report card on the Australian economy.

    The proposition is supported by new evidence showing rental vacancy rates are lowest in suburban areas where most new migrants tend to settle, such as the western suburbs of Sydney.

    The IMF said twin booms in migration and mining added to the risk that the economy might grow faster than desired, sparking inflationary pressures.

    On the downside, higher interest rates and tighter credit conditions flowing from the global finance crisis were likely to restrain consumer spending.

    The Treasurer, Wayne Swan, said that since the report was completed, these risks had shifted even further to the "downside". He said the report had given the Government a "very big tick" for its first budget, which the IMF described as "prudent" and "contractionary".

    The IMF also concluded that while Australian banks were profitable and well capitalised, the global financial crisis had exposed some "vulnerabilities", including the high indebtedness of Australian households, and banks' reliance on offshore funding, which had become more expensive since the credit crunch.

    These higher costs have had a direct impact on mortgage holders as lenders were forced to lift interest rates outside the Reserve Bank and restrict lending to less attractive borrowers.

    Banks could suffer a "significant fall in profits" if they lost access to funding from offshore markets, which accounted for a quarter of their total funding, the IMF said. But banks' exposure to highly indebted households was less of a concern. While house prices were moderately overvalued, it would take a huge increase in loan defaults to cause problems for the banks.

    The Reserve Bank will today release its report on the health of Australia's financial system.

    In its report, the IMF revealed a doubling in the migration-to-population ratio over the past three years had coincided with a trebling in the pace of growth in rents.

    More immigrants settle in NSW than in any other state or territory, the ABS figures show.
    more here
    http://www.domain.com.au/Public/Article.aspx?id=1222217395222&index=NationalIndex&headline=Rental crisis linked to migration boom