The housing market in Australia is a complex beast, and the question of when housing completions will overtake population growth is a tricky one. It's a topic that's been on my mind lately, and I've been thinking about the various factors at play. Here's my take on it.
First of all, let's talk about the current situation. Australia's housing pressures are a result of years of mismatched policy, with falling supply and surging migration. The net migration numbers have been all over the place in recent years, and so have housing completion rates. This isn't a new issue, but it's been exacerbated by the COVID-19 pandemic and the subsequent labor market shocks.
The peak in dwelling completions was reached in the September quarter of 2018, with 57,192 completions. However, this was followed by a sharp decline, with completions falling to 42,473 in the March quarter of 2022. The government's initial response to the pandemic was to focus on labor shortages, which led to a massive increase in job vacancies, with 475,000 vacancies in August 2022. This prompted the Coalition Government to take unprecedented measures to boost immigration, including fee-free visa applications and relaxed work restrictions.
The result? Net migration boomed to almost 540,000 in 2022-23. But this was a double-edged sword, as it led to a surge in housing demand, while housing completions continued to fall. The government's response was to increase the permanent migration program, but this had limited impact as the bulk of the program was sourced from people already in Australia.
The story doesn't end there. From July 2023, the government began tightening immigration policy, leading to a fall in net migration. However, this was not enough to meet the Treasury's forecast of 225,000 net migrants in 2026-27. The government will need to tighten further to achieve this goal.
Now, let's talk about the implications. If the government's forecast of housing completions and net migration is delivered, we could see a period of years from 2027 where housing completions substantially exceed population growth. But this is a long way off, and there are still many unknowns.
One of the biggest unknowns is the state of the economy and the labor market. A global recession, triggered by Trump's war, could lead to a large increase in Australian citizens returning and a decrease in net migration. This would help the government deliver on its net migration forecasts, but it would also make life harder for house builders with rising costs of materials and travel. The shortage of tradies is likely to remain.
In conclusion, the housing market in Australia is a complex issue, and the question of when housing completions will overtake population growth is a tricky one. It's a topic that requires careful consideration of various factors, including migration trends, labor market dynamics, and economic conditions. As an expert, I would advise the government to continue tightening immigration policy and addressing labor market issues to ensure a sustainable housing market in the long term.
