Australia's housing market 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 wanted to explore it further and share my thoughts. Personally, I think the answer lies in understanding the interplay between policy, migration, and the economy. Let's dive in.
The Housing Shortage
Australia has been grappling with a housing shortage for years, and it's a problem that's only getting worse. The source material highlights the stark contrast between falling housing completions and surging migration, a trend that predates the COVID-19 pandemic. What makes this particularly fascinating is the way in which these two factors have been in a constant dance, with each influencing the other in a complex feedback loop.
The peak in dwelling completions in the September quarter of 2018, at 57,192, was followed by a sharp decline to 42,473 in the March quarter of 2022. This decline occurred despite a forecast by the Coalition Government in the 2019 Budget of significant population growth, with net migration averaging around 270,000 per annum over ten years. What many people don't realize is that at the time, there was no plan to increase housing completions to meet this projected growth. This lack of foresight set the stage for the housing crisis that would follow.
The Role of Migration
Migration has been a key driver of Australia's housing market, and its fluctuations have had a significant impact on housing completions. During the COVID-19 pandemic, net migration fell into negative territory, and the fertility rate declined, which led to a decrease in housing completions. However, the major concern during this period was the labor shortage, with job vacancies reaching a record high of 475,000 in August 2022.
The Coalition Government responded with unprecedented measures to boost immigration, including fee-free visa applications for students and working holiday-makers, and the introduction of the COVID visa. These measures led to a boom in net migration, reaching almost 540,000 in 2022-23. The new Labor government, under pressure from the business community and the Coalition, increased the permanent migration program, but this had relatively little impact on net migration.
The Impact of Policy Tightening
From July 2023, the government began tightening immigration policy, leading to a fall in net migration to 430,000 in 2023-24 and 305,000 in 2024-25. Treasury is forecasting a further decline to 260,000 in 2025-26 and 225,000 in 2026-27. However, the government's response to this decline has been to increase offshore student visa rejection rates and double the visa application fee for temporary graduates, which may not be enough to achieve the desired reduction in net migration.
The Housing Pipeline
New dwelling commencements increased by 11.6% year-on-year to 48,778 (seasonally adjusted) in the September quarter of 2025, suggesting that the housing pipeline is strengthening. However, the lag between commencement and completion means that this improvement will not translate into a material increase in completions until late 2026 at the earliest. If the government's forecast of housing completions and net migration is delivered, we would see a period of years from 2027 where housing completions substantially exceed population growth.
The Big Unknowns
The state of the economy and the labor market are the big unknowns in this equation. A global recession, triggered by Trump's war, could lead to a large increase in Australian citizens returning, New Zealand citizens departing, and lower net migration of other groups. This would help the government deliver on its net migration forecasts but may also make life harder for house builders with another rise in costs of materials and travel. The shortage of tradies is likely to remain.
A deep recession would make delivering the government's house completion target more difficult than delivering its lower net migration forecast. The future of Australia's housing market is uncertain, and it will take a combination of policy, economic, and migration factors to determine when housing completions will finally overtake population growth. From my perspective, the story of Australia's housing market is far from over, and it will be fascinating to see how the pieces fall into place in the coming years.
