How will stalled net overseas migration impact housing demand?

Tim Lawless, CoreLogic Head of Research

Recent forecasts from Treasury indicate annual population growth across Australia is set to slow from around 1.4% pre-COVID to 0.6% through the 2020/21 financial year. In raw numbers, that implies Australia’s annual population growth will reduce from around 350,000 in 2019 to 154,000 over the year ending June 2021 – a reduction of 56% relative to 2019 levels.  

If the Treasury forecasts are right, this means the rate of population growth (a proxy for underlying housing demand) will be the lowest since 1917. Most of the forecast decline in population growth is due to stalled net overseas migration, which is expected to drop from around 232,000 net migrants in the 2018/19 financial year to just 31,000 in 2020/21.  This will be disruptive to housing demand. However, the impact will not be evenly spread.

Nationally, population growth is comprised of net overseas migration (NOM) plus the natural increase (which is simply births minus deaths).  Over the past thirty years, NOM has accounted for 51% of Australia’s population growth. Since late 2016, NOM has increased in importance, comprising more than 60% of population growth.

Importantly, on the composition of NOM, temporary migrants comprise the large majority of NOM to Australia.  In 2019, roughly 70% of Australian migrants arrived on temporary visas, with the large majority of these classified as students or visitors.  Permanent migrants comprised around 30% of NOM, with most of these arriving under skilled visa arrangements (45% of permanent migrants) with the second largest portion arriving under ‘special eligibility or humanitarian’ conditions (28%). 

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