Australia, Immigration And Housing - Just The Numbers

How high is migration relative to other nations and how many homes need to be built to keep up?

As of the latest data from the Australian Bureau Of Statistics (ABS), which covers up to the end of the September quarter of 2023, net overseas migration sat at a level of 548,800 people over the last 12 months.

This represents a figure that comes to roughly 2.05% of the population at the conclusion of September quarter of 2023. To put this figure into perspective, it is the highest level of per capita migration in Australian history excluding the impact of returning servicemen and women following the conclusion of the First World War.

When comparing this metric with other developed nations in the present day, something of a qualifier is required. Most developed nations are statistically located in Europe and in many cases the most recent data shows the impact of Ukrainian refugees entering the assessed nations, in some cases by the hundreds of thousands per year. In order to provide a more balanced analysis, figures for 2019 and the latest available data for each nation will both be provided (sources for each at the bottom of the article).

As of 2019, in Western and Northern Europe, the population weighted average rate of migration was 0.48%. As of the latest available figures, the population weighted average rate of migration relative to the population into Western and Northern Europe is 0.93%. This is based on a combination of data for the calendar years of 2022 and 2023 depending on the nation in question.

For today’s purposes Western and Northern Europe is defined as:

Austria, Belgium, Denmark, Finland, Germany, Ireland, Italy, Norway, Netherlands, Portugal, Spain, Sweden, Switzerland and the U.K

This figure of 0.93% is slightly lower than Australia’s average per capita migration rate between 2006 and 2019 of 0.99%, despite the European figure being significantly impacted by the large influx of refugees from the war in Ukraine.

The Anglosphere (Ex-UK)

You may have noticed that so far the Anglosphere nations of Canada, New Zealand and the United States have been conspicuously absent, and for good reason. At one end of the spectrum the United States has a much lower rate of migration than most of Europe at their pre-pandemic rates. Even if the influx of migrants coming across the southern border are factored in, by some estimates in per capita terms the U.S total is still lower than that of the weighted average for northern and western Europe.

At the other end, Canada and New Zealand have extremely high levels of migration relative to the overwhelming majority of their developed world peers.

How Many Homes Does Australia Need To Build?

With the ongoing evolution in household sizes and living arrangements, this can be a challenging figure to quantify, it very much depends on at what point one considers that the housing market was adequately supplied with homes in aggregate.

A reasonable starting point is arguably the end of 2022. By this point the rollercoaster cycle in housing supply and demand had broadly been allowed to rebalance in aggregate. 2020 and 2021 saw an excess of homes being built relative to the requirements based on population growth and household size in aggregate, but by the end of 2022 that being entirely reversed and read a deficit of around 8,000 homes.

In order to get the most clear picture on the actual requirements for new housing numbers, we’re going to go a bit deeper than the usual surface level analysis and include some other important inputs.

Those additional inputs being, the impact of not all dwelling completions adding to net housing stock, roughly 1 in 10 homes sitting empty at any given time (an average of 10.2% empty on each census night since 1981) and the continued demographic decline in household size driving additional housing demand.

In 2023, the continued decline in household sizes drove demand for around an additional 30,000 homes. As the population continues to age and have fewer children per capita, this trend will continue to demand increasingly more homes each year, in excess of those required purely through population growth.

Based on all the inputs above, the most recent estimates for dwelling completions and migration continuing at the current level into the end of 2023, Australia came up 161,700 homes short in the calendar year 2023, not including the 8,000 home deficit carried over from 2022.

If we assume net migration will return to the level as laid out by Treasury in the mid-year budget (375k for 2023-24 and 250k for 2024-25), which is something experts believe is increasingly unlikely to occur, Australia will require around 255,000 dwellings to be completed in the calendar year 2024. Current forecasts put estimated dwelling completions at 153,000 to 165,000 for 2024.

Based on the immigration numbers laid out in the forward estimates of the mid-year budget and natural population growth sitting at roughly the 5 year average, an average of roughly 220,000 homes would need to be completed every year from 2025 onwards to keep up with population growth and household size changes.

AMP’s Shane Oliver recently estimated that:

“The surge in immigration is estimated to push the housing shortfall to around 200,000 dwellings this financial year.”

When we combine Treasury’s estimates for migration with either Shane Oliver’s estimate for the housing shortfall or my own, its challenging to see how enough homes can be built to simultaneously keep up with demand and begin to meaningfully resolve the housing shortage in the short term.

While the continued resurgence in share housing and the growth in multigenerational living will put some degree of upward pressure on household sizes and by extension housing demand, the evidence from the ABS thus far has shown deteriorating demographics is counteracting the impact of these trends and then some.

Ultimately, the figures indicate that the housing shortfall is likely to continue to grow and is unlikely to be resolved any time soon based on the numbers in Treasury’s forward estimates.

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