Sydney and Melbourne have been placed off-limits to all new, incoming migrants who want to buy residential property “down under.” Why? Because home price increases have been the steepest in the country’s two largest cities. How long with they have to wait to buy in Sydney and Melbourne? Up to 5 years  while residing elsewhere in Australia…starting now.

Are these measures drastic or in line with other measures the Australian government has taken in the past to “guide” the country’s real estate market? You decide.

During the worldwide housing bust, Australia’s government took bold steps to stop home prices from falling. The government increased its already in place grant of $7,000 for first time homebuyers to $14,000 for an existing home and to $21,000 for a newly built home. The result? Australian home prices resumed their upward climb while the US housing market continued to fall.

Once the Australian economy boomed by selling iron ore and coal to China, the government instituted big tax breaks for real estate investors. If an investor bought property that lost money, the loss reduced the amount of taxes the investors would pay on their salaried income. Because of those tax breaks, many Chinese investors were encouraged to buy investment properties. In turn, that increased demand drove up prices.

Not to be ignored in any way, shape or form, approximately 40% of ALL mortgage borrowers on Australian property have interest only loans. They do not pay the principal on the loan, just the interest on the loan. As a result, foreigners India – 21%, China – 15% UK – 9%) own 10% of all new homes and 5% of all existing homes in Australia.

Lastly, and perhaps most significant to these latest restrictions regarding Sydney and Melbourne, Australia has had an “open door” policy towards in-bound migration, unlike the US, UK and some European countries. Its population has grown more than twice the average of any other developed world country. This translates into 184,000 new arrivals in fiscal 2017 or one person arriving every one minute.

The result of this rapid population growth is that residents are frustrated and angry that their quality of life has been compromised. House prices are too high, roads are clogged and wages are stagnant.

According to Steven Ciobo, a member of Prime Minister Scott Morrison’s cabinet, “There is clearly a concentration of migration purely into Sydney and Melbourne…that is putting immense pressure…on these two cities.”

Despite prices dropping in Australia currently, the fastest national drop since 2012, Morrison’s government has taken this step to essentially divert in-bound migration to more affordable cities such as Hobart, Perth, New South Wales, Victoria and Darwin.

Just as the Australian government has propped up housing demand in the past with first-time buyer’s grants, interest only loans and tax breaks for investors, Australia is propping up its real estate markets by disseminating migrants to smaller cities within the country.











Claim Your FREE Real Estate Treasure Map!