This is an almost inevitable result of a high level of immigration anywhere and Australia’s Leftist Federal government is deliberately and openly fostering a high level of immigration. The price problem would be much alleviated if more land for housing were released from restrictive land-use regulations but the Greenies would raise hell if that were done so the problem will only get worse

AUSTRALIAN families are being priced out of the property market by record numbers of highly paid skilled workers arriving from overseas. Research by The Sunday Telegraph has revealed for the first time how skilled immigrants – predominantly from Britain, India and China – are forcing house prices to some of the highest levels in the world when compared with average incomes.

Almost 115,000 permanent skilled visas were issued last year, compared with just over 40,000 in 1998-99 – an increase of 187 per cent. During the same period, the median house price rose 168 per cent, from $156,600 to $420,600.

Although the number of migrants is relatively low compared with total property transactions, which have averaged 500,000 a year over the past 10 years, experts say property-price inflation is driven not by what the average buyer can afford to pay, but by the highest bidder. And because skilled migrants command above-average salaries, they pay above-average prices. As a result, a relatively small number of highly paid buyers can have a disproportionate effect on house prices.

“There’s no question the number of skilled migrants is a key factor in driving up prices,” John Edwards, of property monitor Residex, said. “You need only two highly paid buyers at an auction to take the price of a property well above what any other party could afford to pay.”

Proof of this theory came when Mr Edwards plotted a chart of the increase in skilled migration alongside national house-price growth. “It correlates at a rate of 98 per cent, which is almost unheard of,” he said. “It even has an 18-month time lag, which is obviously the period between immigrants arriving in Australia, getting themselves settled and when they first purchase a property.”

Coinciding with the surge in skilled immigration, the median Australian property now costs 5.5 times the average household income, and about eight times income in Sydney. That compares with a ratio of 2.5 times household income in the US and five times income in Britain.

Property prices in the US and Britain have collapsed, but neither country approached Australia’s peak of six times income even before their markets crashed. Australia’s skilled migration program is likely to keep prices rising for years to come. As The Sunday Telegraph revealed last week, the median Sydney house price is forecast to hit $1 million by 2020.

“We need immigration for our economy, but the fact they have higher-than-average incomes at a time when the supply of housing is constrained, inevitably results in prices going up,” AMP Capital chief economist Shane Oliver said.

Other economists, however, say the shortage of housing supply is only partly to blame. “The fact there is a shortage of property doesn’t necessarily mean prices have to keep rising,” Steve Keen, professor of economics at the University of NSW, said. “There was still a shortage of property in the UK when its housing prices crashed.”

The list of skilled professions issued by the Department of Immigration and Citizenship is dominated by high-earning professions such as accountants, IT workers, engineers and health-related specialists, from chiropractors to radiographers.

Meanwhile, the number of visas issued to unskilled families has been falling for years, from around 60,000 in 1995 to about 50,000 last year, further increasing the bias towards high earners. The result is a higher proportion of higher paid workers among skilled migrants, even as the number of skilled visas is reduced. Last year, the Government cut permanent skilled migration visas by 14 per cent from 133,500 to 115,000. It has proposed a further cut to 108,100 for 2009-10, a reduction of almost 20 per cent on previous levels.

[Skilled migration visas are only one of several ways to migrate legally to Australia. The present Federal government is reorienting the migrant intake towards less skilled people while increasing numbers overall. But low-skilled people still have to be housed so that will bid up prices in poor suburbs, which will be MUCH more disruptive than the situation described above. When poorer native-born people find themselves priced out of housing in their old suburbs while immigrants are increasingly moving in, the result could well be explosive — JR]