Australia’s housing market is already in crisis, with asking rents soaring at a double-digit pace across the combined capital cities amid record low vacancy rates:
Source: CoreLogic
The situation is certain to worsen, with this week’s federal budget aggressively ramping up its net overseas migration (NOM) forecasts.
Australia is now projected to receive an unprecedented 715,000 net overseas migrants in 2022-23 and 2023-24, up from a projected 470,000 in the October 2022 Budget:
Australia’s long-term NOM projection has also risen from 235,000 a year to 260,000 a year.
In turn, Australia’s population is projected by the budget to soar by 2.18 million people in just five years, which is the equivalent to adding five Canberra’s or one Perth to the nation’s existing population:
This projected immigration (population) boom has arrived at a time when the nation’s home building sector is on the verge of collapse due to widespread insolvencies caused by rising material and financing (interest rate) costs.
Because of these failures, there are now fewer builders left to satisfy the nation’s housing needs in the face of the enormous influx of migrants.
The following figure, which compares house completions to actual and expected population increase, highlights the scope of Australia’s housing crisis:
During the fifteen years of “Big Australia” immigration preceding the pandemic, Australia did not build enough dwellings.
Now, the housing supply problem is guaranteed to worsen as construction levels fall, while Australia is expected to see record population growth of between 400,000 and 500,000 people per year.
It is a recipe for disaster for Australian renters.
Louis Christopher from SQM Research summed up the situation aptly when he told The AFR that too many construction projects are being cancelled just as demand is booming.
“I’m not sure how Labor can be that confident that they’re going to achieve their goal of a million dwellings being completed by 2029″, Christopher said.
“Overall, building approvals are very concerning”.
“The government needs to manage migration numbers. New home building catering for that population expansion will not be there”.
“This has significant ramifications for the ongoing rental crisis”, Christopher warned.
In this regard, Opposition Leader Peter Dutton was right to warn: “We’ve got a housing crisis, we’ve got a rental crisis, and they’re bringing in one and a half million people over a five-year period”.
Building homes for such a massive rise in population is an impossible undertaking even under ideal housing conditions.
It is even worse when the entire housing construction industry is collapsing amid skyrocketing materials and financing (interest rate) costs.
Dark days are ahead for Australian renters.
