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• Topic:Federal Government

11h ago11 hours agoThu 6 Nov 2025 at 8:00pm

The role of migration is among the most contentious elements of the housing debate.

There is growing support across the political spectrum for the idea that affordability can be improved by taking action on the supply side and building more homes.

But some on the left and right argue more could also be done on the demand side.

Some progressives see opportunity to reduce demand by chasing property investors out of the market. But for conservatives, the obvious way to slash demand is to slash migration.

At the last election that cause was championed by Peter Dutton, who blamed housing pressures on the pre-pandemic spike in temporary migration. The argument retains currency among some Liberals and many voters.

Economists and housing experts echo the assessment that migration levels have some effect on the housing market. But they also point to costs associated with a cut. These charts go some way to illustrating the trade-offs.

Migration plummeted, then surged

Much recent discussion about migration has been concentrated on the record levels of "net migration" seen after the pandemic.

The net migration figure tracks arrivals and departures, and in 2023 the rate exceeded half a million per year.

This was a combination of high arrivals of temporary workers and international students who had been unable to arrive during the pandemic, and low departures because those who were here in the pandemic were granted longer stays.

But the peak followed record lows during the pandemic, when an exodus of temporary migrants saw net migration dip into negative territory. And since the 2023 peak, net migration has fallen sharply, with expert predictions that this trend will continue.

Overall, this does not appear to have substantially shifted the migration trajectory in Australia. The number of migrants in the country at any one time is now nearly 2.5 million. That is a record high, but the annual growth rate for that figure in the last available year fell back to levels that were normal before the disruptions of the pandemic.

Growing population, slowing construction

Still, that recent growth rate of about 4 per cent per year is high by historical standards. Overall, growth in the 2010s was close to 2 per cent a year, higher than the two decades before but roughly the same pace as the 50 years before that.

But at the same time, the growth rate of Australia's housing stock has plummeted. Over the entire period from 1947 to 2001, the number of homes used to grow faster than the number of people, but since 2001 that has flipped.

This is the main reason many economists say supply shortages are the primary cause of deteriorating housing affordability: population growth was not different to levels seen in the past, but construction was.

Modest contribution to house prices, larger for rents

Still, most economists and experts agree that population growth, and migration in particular, have made at least some contribution to the rising cost of housing.

Modelling by academics at Monash University and RMIT found that it grew by 1.1 per cent more in each year between 2006 and 2016 than would have happened if there was no migration.

Still, that is only a small fraction of the 5.95 per cent annual house price growth that occurred over that period.

And migration also has economic benefits. Measured simply in terms of government budgets, Treasury has found that permanent migrants tend to pay more taxes over their lifetimes than they "cost" in the form of welfare or other government assistance, which is not true for the average Australian.

And both permanent and temporary migrants add to economic activity when they work and spend money here. Speaking last year about whether the spike in migration had affected the economy, Reserve Bank Governor Michele Bullock said she believed it was neutral overall.

"New migrants add to demand … they have certainly added to pressure on the housing market, we know that," she said. "But on the other hand, they have added to labour supply … I think it's been pretty much of a muchness."

When it comes to buying homes, temporary migrants play a relatively small role. Only 1 per cent of property transactions in Australia in the 2022-23 financial year were made by foreign buyers.

Even so, both major parties went to the last election promising a freeze on foreign buyers, which is now in place.

In the rental market, however, temporary migrants can play a larger role. In the same remarks about migration, Ms Bullock singled out rents as an exception to the otherwise neutral story, saying migration was putting "big pressure" on the rental market.

The Grattan Institute has estimated that a cut to permanent visas – similar to what the Coalition proposed at the last election – would lower rents by about 2.5 per cent over a decade.

And analysis by the Centre for Economic Development shows that in a handful of areas with very high migration growth in the last few years, there has also been above-average growth in rents.

Migrants can also add to housing supply

Most of the discussion about housing and migration focuses on the demand side, but migrants can also contribute to the supply side if they work in the construction sector.

There have been calls across the political spectrum to do more to prioritise construction workers in the migration program, given that labour shortages are routinely identified by the construction sector as a key obstacle to building more.

But economists say Australia's sluggish construction outcomes are not just because there are not enough builders, but also because the sector itself is not efficient.

Australia builds homes less efficiently for a given level of labour and capital than it did 30 years ago, which the Productivity Commission says is in part because of complicated regulations and in part because of outdated methods and a lack of innovation in the sector.

Australia's construction industry is relatively large by the standards of the advanced world, roughly in line with its relatively fast population growth, which may suggest room to build more with the resources we have.