The Australian government must adjust immigration in Australia in line with property supply as real estate prices keep soaring, according to a chief economist of a leading financial services provider.
“That’s the real issue here. We pump people into the economy, and then we all go, ‘Surprise, surprise, house prices are expensive. We got housing affordability problem.’ Of course, we’re gonna have that problem,” AMP’s Chief Economist Shane Oliver told The Australian Financial Review Property Summit.
“So 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.”
Mr. Oliver noted that Australia’s immigration levels have been significantly above its property supply since 2005, breaching the levels in the 1990s.
University Student Housing a Booming Market
Earlier, University Living stated in its “Beyond Beds: Australia Student Housing Report” that Australia’s student housing market is estimated to be worth $10 billion (US$6.7 billion) and will increase at a compound annual growth rate (CAGR) of 17 percent.)The economist said that despite the large increase in the number of immigrants, the completion of dwellings did not have the same pace and only had a jump until the apartment building boom from 2015 to 2018.
Mr. Oliver said that with the current high-interest rates, it would be harder to achieve the Australian government’s target to build 1.2 million dwellings over five years beginning July 2024.
“That’s going to be a bit of a challenge. One thing that might make it a little bit easier is if there’s more focus on social and affordable housing, so a lot of the extra housing is somewhat lower-cost housing, entailing less resources and less hours to build and that may make it a little bit easier,” Mr. Oliver said, as reported by the AFR.
On Sept. 12, Master Builders Australia said that it expects home construction to peak at just over 241,000 in 2026-27, but still acknowledged there is much work to be done to deliver the government’s target.
“There is still a lot of work that needs to be done to achieve the revised target of 1.2 million homes as announced by National Cabinet last month,” Master Builders Australia CEO Denita Wawn said.
“The cost of building homes has been exacerbated over recent years with unnecessary delays and barriers encountered on their journey to completion. This includes planning impediments, lengthy approval processes and high developer charges on new land developments.”
In an interview with Channel 9, Minister for Housing Julie Collins expressed optimism that the government would be able to reach the targeted number of new homes, especially with the $10 billion Housing Australia Future Fund aimed to address homelessness.
“We’re obviously working and talking to the construction sector. They say the million homes is achievable. What we’re doing is incentivising states and territories to change and do some planning and zoning reforms to make sure that we can build additional homes over that million homes,” Ms. Collins said.
