Housing crisis rooted in insufficient supply, not migration demand: Report

A new report from the Business Council of Australia (BCA) revealed the housing market’s critical issue lies in the insufficient supply of new housing rather than the strong demand generated by migration.

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The industry association’s Housing Australia’s Talent report revealed two-thirds of Australians believe that properly planned and well-managed migration is good for the country.

“We know that well-managed migration is not only good for the economy — it’s a crucial bedrock of Australian society, but we have to manage it properly,” Business Council chief executive Jennifer Westacott said.

On the contrary, the report highlighted the lack of migration had a detrimental impact on the economy.

“A significant majority of Australians also have experienced the real impact of worker shortages, whether it’s accessing services or expanding their businesses because they can’t get people to actually do the jobs,” she remarked.

With the reopening of the country’s borders and travel restrictions being lifted in the wake of the pandemic, there have been forecasts both from the media and industry experts that an expected influx in migration will play a role in further tightening the screws on the country’s housing and rental market.

Peter Gavalas, a buyer’s agent from Resolve Property Solutions who is based in Perth, warned in January that the city’s mass migration is putting sustained pressure on its property and rental market.

But according to Ms Westacott, the crux of the housing crisis is that “there [are] simply not enough new homes being built to meet demand” crucially at a time when “housing affordability is declining”.

“In fact, new housing supply has been falling over the last half-decade,” she added.

Data showed new housing supply has been falling since 2016–17, particularly in terms of new apartments and other medium-density dwellings.

“The pandemic reignited and accelerated the trend of declining household sizes. This drove housing demand even while population growth stalled,” the report read.

While high migration numbers in the 2023–24 budget served as a “temporary correction” following border closures, the report noted these did not fully compensate for the pandemic’s impact on migration.

The first full-year budget of the Albanese government delivered by Federal Treasurer Jim Chalmers on 9 May is forecasting a temporary migration boom reflecting a “one-off” catch-up after the COVID-19 pandemic, with more than 700,000 people expected to move to Australia by the end of 2024.

The report also noted that most returning migrants are temporary visa holders, such as students, who left the country.

At the start of February, a snap decision by the Chinese government placed Australia’s desperate need for student accommodation under the spotlight.

During that time, Minister for Education Jason Clare said 35,000 Chinese students returned to Australia in the first month of the year, while information from The Guardian revealed that “42,000 Chinese nationals with student visas remain offshore … including 5,500 applicants processed in the past month and 2,400 in the past fortnight”.

While arrival numbers are expected to return to normal from 2023–24 onwards, there remains a projected shortfall of 215,000 migrants compared to the pre-pandemic forecast by the end of 2023–24.

Digging deeper into the factors causing the lack of available housing, the report found limitations imposed by poor planning systems and restrictive zoning significantly hampered long-term supply.

The report underlined the importance of “sufficient infrastructure capacity” to support new housing and called on governments to deliver infrastructure to support new housing.

“In general, infrastructure investment is significantly more expensive to support greenfield areas than for infill development,” it added.

Ms Westacott stated: “There needs to be a clear plan for building new homes and infrastructure that is aligned with the growth in Australia’s population.”

While the BCA welcomed the government’s commitment to the Housing Accord, which aims to build 1 million new homes over the next five years from 2024, the executive emphasised that “better coordination with state governments is crucial”.

Below are key recommendations made by the BCA to fix housing affordability and access to low-cost housing:

  1. Introduce national dwelling targets aligned with population growth projections to drive long-term housing supply.
  2. Expedite land rezoning and approval processes to accelerate new housing projects.
  3. Revitalise transportation-connected areas to enhance housing opportunities.
  4. Promote innovative housing solutions like build-to-rent to offer appealing long-term rental options.
  5. Establish better coordination between housing and infrastructure planning by linking federal infrastructure projects to housing delivery.
  6. Utilise the federal infrastructure pipeline review as a starting point for this alignment process.

Citing the strong consensus among Australians regarding the undeniable benefits of a robust and healthy migration program, Ms Westacott emphasised the need for proactive actions to ensure that Australia remains an attractive and viable option for migrants.

“Now is the time to do the important work around housing to ensure we remain an attractive destination for people to live, to access good jobs and for businesses to attract workers that they urgently need in order to expand and grow,” she concluded.

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