Chopra, head of Australian research at Bank of America before joining CBRE in 2021, says population growth is “one of the biggest drivers of vacancy and rental growth in both commercial and residential property” and fundamental to real estate performance.

“Nothing beats fundamentals,” he says. “Fundamentals crush interest rates.”

The chief executive of the Property Council, Mike Zorbas, took a similar headline view on last week’s budget.

“The real story of this budget is the five-year net overseas migration total of almost 1.5 million people out to 2027,” he said. “This is the largest five-year running NOM total in the past 30 years.”

Zorbas welcomed the increase with skilled migrants “essential” in many sectors of the economy but stressed the need for “redoubling of national and state commitments” to increase housing supply.

This is not a column about the pros and cons of the immigration policy. For some it is a giant property Ponzi scheme, with the critical shortage of housing driving further inflation. For others, it is much needed catch-up that will address labour shortages but requires a comparable investment in housing and infrastructure.

Chopra is not part of that debate. He is simply, and pragmatically, looking at what the migration numbers mean to real estate rents and values.

And the impact is substantial, even if, like Chopra, the calculation is based on the three-year NOM number of 975,000 people and not the five-year 1.5 million.

It’s a tailwind for the sector, pushing against all the current negatives from rising finance costs, to yield decompression, falling values and economic slowdown.

Investors do take note of population growth, and for global investors Australia’s current 2021-2030 projection of 14 per cent growth puts the country at the top of comparable investment destinations.

The Property Council’s Zorbas says the influx will “underpin our attractiveness as a global investment destination”.

However, right at this moment, global investors are balancing the strength of Australia’s underlying demand, against the lure – some would say risk – of discounted prices, and higher cash returns, in other parts of the globe.

For Australia’s shopping centres and high streets, Chopra estimates the new 975,000 residents will generate an extra $13.3 billion in annual retail spending, adding 3 per cent to the total and creating a “nice tailwind” for the sector.

The new spending is on both discretionary and non-discretionary items, and, in Chopra’s view, already showing up in the surprising strength of activity in the shopping malls.

New retail workers would also address labour shortages that have crimped trading hours, and the maximisation of turnover, in some retail locations.

In his latest advice to investors, Chopra lists near-city shopping centres as his “number two” money-making suggestion.

The new influx will also include, on Chopra’s numbers, 147,000 white-collar migrants who will occupy some 1.8 million square metres of office space – more than 30 standard office buildings – in a sector struggling with flexible working, obsolescence and dampened investor sentiment.

Paul Bloxham, HSBC chief economist in Australia, writing in his Australian Economic Comment this week also noted that if, as he expects, rents rise and the household numbers increase again, the migration surge could benefit the office towers.

“Office occupancy could rise if work from home becomes less viable as dwelling rentals rise,” he wrote this week.

The rise in population could also drive increases in demand for emerging alternative property sectors such as data centres, healthcare, childcare and social infrastructure.

Of course, the big impact – boon for some, but crisis for many – is in the housing sector.

Chopra, calculating on just under 2.4 people per household, estimates that the new migrants will need 408,000 new homes, in addition to the substantial existing deficit of social and affordable accommodation.

Nor will the demand be spread equally. On past experience, 35 per cent of the new residents will settle in Sydney, 30 per cent in Melbourne, 15 per cent in Brisbane, 13 per cent in Perth and 4 per cent in Adelaide.

Housing experts will debate the numbers. HSBC’s Bloxham expects “behavioural changes”, not new supply, to accommodate much of the population surge.

“Sharply rising rents will likely mean an increase in average household size,” he writes.

“Some renters may choose to move back into group housing arrangements, or back into a family home, while new migrants may also choose to move into housing in larger groups,” he wrote.

By comparison, the much-discussed policy measures to improve housing supply “would take time to have their effects” and “are often difficult to achieve”.

Overall, it is hard to argue with Chopra’s conclusion – that accommodating the new Australians will be “very, very tough”.

He predicts that rents and capital values of apartments will “zoom” and inner-city residential property is his “number one” money-making idea for investors.

Source: The Australian Financial Review