As he so often does, AMP chief economist, Shane Oliver, got to the nub of Australia’s housing crisis at Tuesday’s AFR Property Summit:
“The nub of the issue, apart from lower interest rates enabling people to borrow more and pay more is that we’ve had, particularly since 2005, immigration levels have been way, way above the level of supply that we actually need”.
“If you go back to the early post-1990s recession, immigration levels were about 120,000 per annum. Then they jumped up to 250,000 to 260,000 per annum”.
“So you really got 150,000 extra population through that period”.
“But if you look at the completions of dwellings, it didn’t really jump up until we had the apartment building boom briefly from 2015 to 2018”.
“And that’s the real issue here. We pump people into the economy and then we all go ‘surprise, surprise’, house prices are expensive. We’ve got a housing affordability problem”.
“Of course we’re going to have that problem. I think we do need to calibrate those immigration levels to the ability of the property market to supply new property and to allow each year for that cumulative undersupply to be whittled away”.
The below chart backs up Oliver’s arguments:
SQM Research managing director likewise called for a two-year migration cap of 90,000 to allow housing supply to catch-up:
“It’s creating shortages”.
“I would strongly argue there should be a short-term cap on migration over the next two years while supply catches up”.
“If we cap migration to 90,000 people over the next two years, the rental crisis would come to an end by the midpoint of 2025, based on our modelling”.
The federal government could solve Australia’s housing shortage with the stroke of a pen by simply cutting immigration back to historical levels of around 100,000 people a year:
It is time to stop scapegoating a ‘lack of supply’ and start acknowledging the immigration elephant driving Australia’s housing shortage.
Well done Shane Oliver and Louis Christopher for speaking the truth. We need more like you.
