Australia’s annual immigration intake must shrink to 200,000 people – less than half of the current 500,000-odd – to avoid overwhelming government efforts to boost supply and improve housing affordability, AMP chief economist Shane Oliver said.
Emphasising comments he made last week at The Australian Financial Review Property Summit, Dr Oliver said such a significant cut was necessary and that official budget forecasts of immigration were “very unreliable” and understated the actual figures.
“Current immigration levels are running well in excess of the ability of the housing industry to supply enough homes, exacerbating an acute housing shortage and poor housing affordability,” he said.
The federal government has pledged to build 1 million new homes over five years. Scott McNaughton
“Without addressing the high immigration level, I find it hard to see how we can resolve the housing shortage and affordability issue anytime soon.”
Without intervention, net immigration for the financial year ending June 2024 was likely to be “500,000 or more,” well over the 400,000 figure forecast in the May budget, he said.
“So I think the best approach would be to cut immigration levels back to say we have 200,000, which is way below where they were even pre-pandemic, to line up with the building industry capacity and to reduce the supply shortfall,” Dr Oliver said.
Home building supply capacity was about 200,000 dwellings a year and the immigration intake would need to be slashed over a number of years to bring supply and demand into balance,” he said.
“I think you need to slow immigration back to 200,000 a year, say over five years, to allow breathing space for supply to catch up, particularly with the government programs to increase the supply of affordable and social housing,” he said.
While there were other ways to improve housing affordability, such as building higher-density homes and decentralising to the regions, these would have no immediate impact on the shortage, Dr Oliver said.
The target to build 1.2 million new homes over five years from July 2024, or 240,000 per annum – supported by 50,000 social and affordable homes – was a welcome solution, but it would also be challenging, he said.
“Australian governments are now focusing on boosting supply, but surging immigration levels could easily overwhelm these efforts and lead to an even worse situation,” he said.
“So it’s impossible to escape the conclusion that immigration levels need to be calibrated to the ability of the home building industry to supply housing. This is critical.”
Developer Nigel Satterley founder of Satterley Property Group told the Australian Financial Review Property summit last week, that the labour force was not “there” to build enough homes to satisfy higher levels of demand.
“If you have a look in Perth, for the last eight years, we’ve been finishing 13,000 homes [while] the demand is 18,000 to 20,000,” he said.
“So if you look around Australia, most probably the underlying demand for housing is about 140,000 dwellings. [But] we can’t build or complete 140,000 dwellings.”
Dr Oliver said the property sector needed skilled workers to build the required housing supply, but he insisted immigration still needed to be recalibrated. “We lacked skilled workers, so the migration program should be designed to bring those people into the country,” he said.
“So we can skew the immigration intake to allow more of the skills that the construction industry needs, but that can still be addressed within 200,000 intake. It doesn’t have to be 500,000. Shoving more people in just means we end up chasing our tail in terms of housing supply.”
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