Housing demand to due to the recent changes to the 457 visa scheme

It sounds almost silly to be ringing a warning bell for the property market when the weekend sales data showed the housing boom still very much alive. But UBS believes investors are underappreciating the impact of visa changes in Australia, which is likely to see demand for homes fall over the near to medium term.

The broker said local housing demand could fall by up to 10% due to the changes to the 457 visa scheme used by foreign workers with specific skills. Demand could fall a further 30% if student visas fell by a third due to stricter conditions on migration that are being imposed by the federal government.

UBS is forecasting a much milder drop for its base case scenario, but make no mistake, the broker is expecting weaker demand going forward and there are a few reasons why local investors should pay attention to this emerging threat, which could have material implications for a number of ASX stocks.

Firstly, this risk factor is threatening a part of the property market that was seen to be better insulated from a property slowdown. Skilled Indian workers are the biggest users of the 457 visas and this group have used the scheme as a pathway to migration in Australia.

This demographic is overrepresented in Melbourne’s and Sydney’s housing market and they tend to buy house and land packages and not city apartments. A tapering in demand from the now replaced scheme will impact on Stockland Corporation Ltd (ASX: SGP) more than the likes of Mirvac Group (ASX: MGR) as the former is one of the country’s largest house and land developers, while the latter is more focused on apartments.

However, the apartment market is long seen to be the property market’s Achilles Heel due to oversupply. The scrapping of 457 visas could well put pressure on another part of the property market at a time when the apartment sector is undergoing challenging times.

What’s perhaps a bigger risk factor is student visas, which are dominated by the Chinese who use education as a way to get permanent residency in Australia. This demographic probably favours apartments over suburban house and land developments.

These potential headwinds are developing against a backdrop of tighter loan conditions and rising mortgage rates. This is why I had flagged residential-exposed stocks as the riskiest blue-chip sector to watch this reporting season.

Companies that supply building materials to the residential housing market could also be facing more challenging times ahead. I don’t know about you, but I will be closely watching the outlook statements from the likes of CSR Limited (ASX: CSR) and Adelaide Brighton Ltd. (ASX: ABC) when they release their results later this month.

Why UBS thinks residential property prices could fall in Australia

 

I take it that this would be more relevant for higher value Melbourne and Sydney property, rather than regional?

 

higher value property is more the ppl not on 457s. these are mainly in the west like h&L

The first to be hit if the visas are reduced are the ones who buy those in h&L in the western suburbs. like pt cook, tarneit, werribee, hoppers etc (i have ips in pt cook) but yeah just calling it as it is. Landed detached properties will still be the way to go.

As for student visas - they will keep coming as first there is already a big pool of supply - i have networks in overseas gov scholarship programs and can tell you the programs and linked to melbourne universities are there for decades. End of the day - if you ask someone in asia if he prefers monash or melb uni over griffth university, the answer 9 out of 10 will be monash or melbourne uni. Also the twinning degrees established in overseas unis like china, malaysia, and even africa will have students finishing off the degrees in australia (in the last year) and majority are from universities like monash, swinburne, deakin, latrobe. There are a lot of sydney unis too like UTS, macquarie etc.

i was looking in the papers and saw my old melbourne high school even has an overseas campus opening in 2018 in asia.talk abt innovation. to attract customers at a young age

 

Never heard of someone on a student visa buying property, so not sure how it would affect demand. Even rental demand- how many overseas students have the coin to rent a place on their own? Many share with a couple of friends, many also share with 20 friends in a 2 bedroom apartment lol

 

You'll be suprised to know once you get to know them.

 

My only two tenants have both been working here on 457 visa (Japanese and now Indian background).

I am not underestimating the impact on demand.

 

Parents fund the purchase from overseas. Once child gets PR after college, parents and grand parents move to settle down.

 

More fear mongering.

 

Ubs is terrible for finding some snippet and running with it.

Did they mention that 457 is being replaced by another that's very similar?

Or that there's a new NZ specific one in the works which will bring a bunch of them over?

 

Too much Fox channel...

 

PR and then ultimately Citizenship is the major lure for massive influx of students. Tighten that and you will see the magic.

Immigration is a easy way for politician to keep gdp growing, but what happens when the real jobs starts to get scarce in not so distant future due to automation?

 

As a property investor don't discount the possibility of
Immigration getting tightened here due to effect of automation,
of course for the peanut gallery, politician will mask it as a 'bogeyman fear of THEM' rather then admit their inability to grow jobs and real salary.

 

Depends there are all types some will stay in 10 in a house like one of my place and

I have rented one to an overseas student he already had 100k in his account for a year living and paid 6 months in advance

I know when I sold my apartment 2 were bought by students who literally sign unconditional contracts and paid 10% and was the highest sold in the building at that time

 

Exactly what I'm been saying all along. And perhaps all those who desire vastly increased immigration (not doubt with vested interests) will be more happy for all these new arrivals to settle in their suburb, or maybe even next door.

 

-ve, Pr is appealing yes, but Citizenship is definitely not as appealing especially for those with money, main reason being majority of australian students are from SEA, China or south Asian. most of these countries do not allow dual/multiple citizenship, their parents have too much money in asia for them to give up their citizenship in their home country, those who give up usually are middle class or come australia to start a new life and have transfer their capital to australia, (very rare).
so technically speaking its split int 2 classes of people.

 

As pasted from SMH:

Australia leads the world when it comes to millionaire immigrants

Backpackers are not the only ones flocking to our shores in world-beating numbers.

Australia attracted more millionaires last year than much larger, and wealthier immigration destinations such as the US, according to a report by South African market research group, New World Wealth.

The researcher said the number of migrant millionaires rose to 82,000 last year, compared to 64,000 in 2015.

More than 11,000 made their way to Australia, which retained top spot on the list.

"For the second straight year Australia is the top country worldwide for millionaire inflows, beating out traditional destinations such as the US and the UK," said the research group.

The data predates the election of US President Donald Trump and his executive order to place travel restrictions on the citizens of selected majority Muslim countries, as well as fresh plans to deport millions of illegal immigrants.

The US was second with 10,000 millionaire migrants, followed by Canada with 8000.

New Zealand was in fourth place, ahead of the UK, giving an indication of the strong influence of Chinese immigration on both sides of the Tasman.

New World Wealth's head of research, Andrew Amoils, said personal safety and a good education system top the list of priorities for these sought-after immigrants – as well as proximity to Asia.

The latter may reflect the departure point for many of these millionaires: China.

About 9000 millionaires left its shores last year. The exodus was greater in France, which saw 12,000 millionaires depart.

Australia is one of many countries that has introduced visa programs to attract wealthy immigrants.

Millionaire migrants, almost all from China, ploughed $3.8 billion into Australian assets since the government created an investor visa category in 2012.

 

"In 1771 Richard Arkwright invented the first fully automated spinning mill driven by water power, known at the time as the water frame.[11] An automatic flour mill was developed by Oliver Evans in 1785, making it the first completely automated industrial process."

 

Cliche as it may be, but this time its different

I would be more than happy to be wrong on this one as I don't like what i see, would happen to regular joes job/income dye to automation within next decade.

 

There were only 24k 457 visas granted in the entire country last year , god alone knows how someone can claim that a reduction in this number or hell even the entire 24k can have such a significant effect on housing demand.

 

Where's the fun in that??