The Australia immigration housing crisis debate often points to migrants as the primary culprit for soaring property prices. However, the data tells a more complex story. While the number of dwellings in Australia has increased by 19%, the population has grown by just 16%, yet house prices have skyrocketed by 70%—far outpacing household incomes.
Perhaps the most telling evidence challenging the “australia migrants are to blame” narrative emerged during the pandemic. When net overseas migration fell dramatically – with over 100,000 more people leaving Australia than entering it – house prices still rose an astonishing 20% in just 18 months. In fact, during the border closure period, house prices jumped 25% in little over a year. This raises a crucial question: what caused the housing crisis in Australia if not immigration?
While research suggests a one percentage point increase in immigration rates can increase average house prices by 3.3%, the immigration and housing crisis connection is clearly not as straightforward as often portrayed. Despite recent net overseas migration reaching 518,000, Australia’s population remains lower than pre-COVID projections, prompting a deeper examination of whether immigration is causing the housing crisis in australia at all.
What Data Says About Immigration and Housing?
Recent data presents a nuanced picture of the complex relationship between migration patterns and Australia’s housing market.
Migration Levels Before and After COVID
Net overseas migration has undergone dramatic shifts, reaching a record high of 518,000 after the COVID-19 pandemic. Nevertheless, current figures show a cooling trend, with migration dropping to 446,000 in 2023-24, down from 536,000 a year earlier. This post-pandemic surge was largely a temporary “catchup” effect following border closures, with much of the increase driven by temporary visa holders, particularly international students who accounted for 207,000 arrivals.
Notably, the migration pattern is already demonstrating a natural correction. Arrivals decreased by 10% (from 739,000 to 667,000) in 2023-24, furthermore, government projections indicate a return to long-term averages in upcoming years.
Population Growth vs Housing Supply
Contrary to popular perception, housing supply has actually outpaced population growth over the past decade. Dwelling numbers increased by 19% while the population grew by just 16%. Historically, Australia has maintained a reasonable balance between dwelling construction and migration, with both averaging around 170,000 annually.
The disconnect began during the pandemic when population fluctuated dramatically while housing completions remained relatively stable. This mismatch has since worsened due to rising construction costs and interest rates. Subsequently, in Victoria, only 60,000 homes were completed in 2024, falling 20,000 short of targets, with the December 2024 quarter showing an 8.8% drop in new dwelling completions.
Is Immigration Causing The Housing Crisis in Australia?
The evidence suggests immigration is just one factor among many. According to research, housing prices would have been only about 1.1% lower annually between 2006 and 2016 without immigration. Likewise, the Grattan Institute estimates that for every additional 100,000 unexpected migrants, rents increase by approximately 1%.
Perhaps most telling, throughout the pandemic when Australia experienced negative net migration (more people leaving than arriving), house prices rose by 20% in just 18 months. Additionally, changes in household size—dropping from 2.8 to 2.5 people per dwelling—have significantly increased housing demand, requiring 1.2 million additional dwellings.
Equally important are economic policies like negative gearing and capital gains tax discounts, which have encouraged property investment and speculation since the early 2000s, thereby contributing substantially to Australia’s housing affordability challenges.
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The Drivers Behind Australia’s Housing Crisis
Beyond the immigration debate lies a set of powerful economic and policy factors that have shaped Australia’s housing landscape for decades.
Tax Breaks For Property Investors
Property investment has become increasingly attractive in Australia through generous tax incentives. Property investors comprise more than 20% of Australia’s housing market, far outstripping first-time buyers who account for just 13%. Moreover, these investors hold more than 27% of all residential property, creating fierce competition in the market.
Negative Gearing and Capital Gains Discounts
The dynamics of the property market have been significantly changed by the combination of negative gearing and capital gains tax discounts. These policies, introduced in the early 2000s, allow investors to reduce rental losses against other income while paying reduced tax on eventual property sales. Consequently, property has transformed from primarily shelter to a tax-advantaged investment vehicle. The Grattan Institute estimates these tax concessions cost the federal budget approximately $7 billion annually, effectively subsidising property investment at the expense of housing affordability.
Construction Slowdowns and Rising Costs
The building sector faces unprecedented challenges despite strong demand. Construction costs have surged 25% since 2019, putting enormous pressure on new housing supply. Interest rate increases have further complicated matters, with housing approvals falling by 9.5% in September 2023 alone. The construction industry also struggles with labour shortages, with 67,000 unfilled positions nationwide. This perfect storm has resulted in housing completions dropping below targets across major cities, further exacerbating supply constraints.
Changes in Household Size and Living Preferences
Demographic shifts have silently driven housing demand upward. Average household size has decreased from 2.8 to 2.5 people per dwelling over recent decades. This seemingly small change has created demand for an additional 1.2 million dwellings – roughly equivalent to five years of normal construction. Alongside this, changing preferences for larger homes and more personal space, particularly following COVID-19 lockdowns, have put additional pressure on housing availability and affordability.
Therefore, although immigration receives significant attention, these structural factors form the backbone of Australia’s housing crisis and require comprehensive policy solutions.
How Different Types of Migration Affect Housing?
Not all migrants impact Australia’s housing market in the same way, with distinct differences evident across various visa categories and settlement patterns.
Temporary vs Permanent Migrants
The housing behaviours of temporary and permanent migrants differ substantially. Permanent migrants show a strong tendency toward homeownership with increasing duration of stay, whereas temporary migrants predominantly rent. Almost two-thirds of permanent skilled visas are granted to people already in Australia, limiting immediate housing market impact. Meanwhile, temporary visa holders demonstrate distinctly different housing preferences, with over 75% renting compared to less than 50% of permanent migrants.
Impact of International Students on Rental Markets
International students, who comprised around half of net overseas migration in 2018-19, have been frequently blamed for rental pressures. Yet research from the University of South Australia found no statistically significant correlation between international student numbers and rental costs. Indeed, only 4-7% of Australian rentals are occupied by international students, with many choosing university accommodation or shared living arrangements. Furthermore, the RBA estimates that an additional 100,000 students would increase rental demand by just 50,000 individuals, raising private rents by merely 0.5%.
Australia Migrants and Regional Housing Pressures
Interestingly, migration to regional Australia has been a long-term trend predating COVID by nearly a decade. These migrants are typically older people with greater financial resources seeking lifestyle improvements. Consequently, this migration has created “knock-on effects” of higher housing prices in regional areas, forcing low-income households to move significant distances to find affordable housing. Regional areas experiencing strongest growth are typically near metropolitan centres or along coastlines with better climates and strong tourism sectors.
Cutting Migration
Proposals to slash migration levels have gained political traction as a solution to the australia immigration housing crisis, yet economics reveals a more complex picture.
Short-Term Rental Relief vs Long-Term Economic Cost
Research indicates that cutting net migration by 100,000 annually would reduce housing prices and rents by approximately 11% over the next decade. This translates to roughly 1% per annum lower property values than would otherwise occur. For temporary reductions, every 100,000 fewer unexpected migrants lowers rents by about 1%. Yet these modest housing benefits come with significant trade-offs, as population reduction directly impacts economic growth and tax revenue.
Skilled Migration and Productivity
Skilled migrants fundamentally enhance Australia’s economic capacity, serving as a powerful lever for national productivity. The Productivity Commission highlights that skilled migration drives productivity gains through “an inflow of skills, ideas, and innovation”. This assessment is reinforced by OECD research showing regions with 10% larger migrant shares report 1.3% higher wages. Even more striking, a 1% increase in university-educated migrants correlates with 4.8% more patent applications over five years.
Budget Impacts of Fewer Skilled Migrants
Each permanent skilled migrant generates an estimated AUD 380,718.57 fiscal benefit over their lifetime. Consequently, reducing migration by 135,000 over four years could cost government budgets AUD 51.99 billion in lost tax revenue. If permanent migration remained at 160,000 annually (versus 185,000), the 30-year cost could reach AUD 322.62 billion. These figures highlight what caused the housing crisis in Australia was not primarily immigration but rather insufficient infrastructure planning alongside migration growth.
Conclusion – Australia Immigration Housing Crisis
The evidence overwhelmingly suggests that Australia’s housing crisis stems from multiple interconnected factors rather than immigration alone. Although net overseas migration reached record highs post-pandemic, house prices had already skyrocketed by 20% during border closures when migration was negative. This fact alone challenges the simplistic narrative blaming migrants for housing affordability issues.
Structural economic policies undoubtedly play a far more significant role in the current crisis. Housing has changed from a place to live to an investment vehicle due to tax breaks including negative gearing and capital gains reductions, which have increased prices and cost the budget billions of dollars every year. Additionally, construction slowdowns, rising building costs, and changing household compositions have created a perfect storm of supply constraints regardless of migration levels.
Cutting migration might provide modest short-term rental relief but would come at substantial economic cost. Each skilled migrant contributes significantly to national productivity and government revenue through taxation. The projected fiscal impact of reduced migration numbers would far outweigh any potential benefits to housing affordability.
Australia must confront this reality: immigration serves as a convenient scapegoat while deeper structural issues remain unaddressed. The true solution lies not in border restrictions but in reforming tax policies that encourage property speculation, boosting construction capacity, and developing infrastructure that supports population growth. Only through tackling these fundamental drivers can Australia hope to resolve its housing crisis while maintaining the economic benefits of a skilled migration programme.
Is immigration the main cause of Australia’s housing crisis?
While immigration contributes to housing demand, it’s not the primary cause of the crisis. During the pandemic, when net migration was negative, house prices still rose by 20% in 18 months. The crisis is driven by multiple factors, including tax policies, construction slowdowns, and changing household compositions.
How will Australia’s housing market perform in 2025?
The housing market outlook for 2025 varies across regions. Sydney is expected to experience a slight dip of 3-5% after 4% growth in 2024. Canberra’s property values are forecast to decrease by 1-4%, with the market likely to remain flat for some time.
What impact do international students have on Australia’s rental market?
Contrary to popular belief, international students have a minimal impact on rental costs. Research shows no significant correlation between student numbers and rental prices. Only 4-7% of Australian rentals are occupied by international students, and an additional 100,000 students would raise private rents by just 0.5%.
How would reducing migration affect Australia’s economy and housing market?
Cutting migration could provide modest short-term rental relief, but at a significant economic cost. Reducing net migration by 100,000 annually might lower housing prices by about 1% per year over a decade. However, it would also result in substantial losses in productivity gains and tax revenue, potentially costing billions in the long term.