Golden years of property investing may be over: Robert Mellor

BIS Oxford Economics executive chairman Robert Mellor thinks the golden years of property investing may be over.

"I don't think another investor-led housing boom is around the corner and a key reason is investors will be sitting on the sidelines for a while given falling rents and, for now, falling prices," he said.

"For someone who has watched the residential market for 40 years, you know that when building activity drops off, so too does GDP. The relationship is very strong," he told the Australian Financial Review.

He is forecasting a drop in migration of about 60,000 this financial year and another 150,000 next financial year.

With about 2.7 people per household, the forecast drop equates to about 80,000 fewer houses needing to be built.

"These people who are no longer coming impact on the rental market, so it will significantly reduce demand and that will lift vacancy rates and increase risks around residential property," Mr Mellor said.

Mellor says ongoing state border closures will put substantial pressure on apartment demand in the months ahead.

"All our numbers show the apartment sector is moving into significant oversupply because of lower net migration and rising number of people per household," Mr Mellor said.

"Even if migration level stays at around 100,000 over the next couple of years, this is still just half of the normal demand."

Inner-city apartments in particular are likely to be hit, as rentals continue to flood the market even as landlords struggle to find tenants.