How will our stretched housing market cope with surging immigration?

Oct 20, 2022
New suburban homes currently under construction in row

Respected ABC commentator Alan Kohler has recently raised this issue in an article provocatively titled Labor’s immigration and housing policies are an explosive combination.

Kohler says “there is now a massive discrepancy between the demand for labour, the immigration needed to fill it, and the available housing”, pointing to the 2.2 million visas granted since June 2022 and the national rental vacancy of 51,437 and 37,626 in the capital cities.

He says the rentals available are “about half of one month’s new arrivals”. It’s not entirely clear how Kohler comes to this conclusion. While overall he points to a very real policy conundrum, it’s important to get the numbers, the timing and accommodation impact right.

Visa approvals and the increased migration program from 160,000 to 195,000 relates to both people already living long-term in Australia as well as people who will arrive in the future. From a labour market and housing perspective, much better to look at actual people movements, both into and out of Australia until we get more detailed data on net migration.

Net migration measures long-term and permanent arrivals minus long-term and permanent departures. Unfortunately, net migration data is published with a very substantial lag and hence the need to look at the months arrivals and departures data.

From November 2021 to September 2022, there have been 6.32 million arrivals and 6.12 million departures, giving a net excess of 0.195 million arrivals.

The largest component has been Australian citizens. There has been an excess of 0.371 million Australian citizens departing Australia over this period. A very large portion left in June 2022 and also in September 2022. Most will be on overseas holidays and many are likely to return in October/November before more head off on holidays in December.

Such a large number of departures will have contributed to labour shortages. Most will have left their houses unoccupied.

There will be a portion who will have left Australia for job/career opportunities overseas – possibly between 25,000 and 50,000. While that will not help with labour shortages it may help reduce pressure on the housing market.

The next biggest portion of international movements since November 2021 has been tourists with a net excess of 0.261 million arrivals. These tourists do not have work rights but will have created additional demand in the economy, exacerbating labour shortages but not renting many houses apart from through Airbnb.

The international movements that will have had the largest impact on housing demand would be students with an excess of arrivals of 0.225 million. They would have helped take some pressure off labour shortages.

In terms of permanent migration, there was an excess of 6,600 family migrant arrivals, 8,840 skilled migrant arrivals and negative 7,960 other migrants, mainly people leaving Australia on Resident Return Visas. The skilled migrants in particular will have both increased pressure on the housing market and reduced pressure from labour shortages.

But what of the future?

After a substantial number of Australian citizens return in October/November, in December we will experience an increase in student and Australian citizen departures and an increase in tourist and working holiday maker arrivals.

The key will be the March quarter of 2022 when there will be both a large influx of new students and skilled migrants. They will need to quickly find both jobs and housing. This may be exacerbated by a larger cohort of Humanitarian Program arrivals.

The Albanese Government is targeting skilled migrants in health and aged care; education and in the traditional trades. As more baby boomer tradies retire, Australia will desperately need to bolster its stock of tradies. Training locals will not be enough. But much more needs to be done to smooth the pathway for overseas students to undertake trade courses at TAFE and find a pathway through apprentice style skills development and eventual permanent residence.

The skilled tradie workforce needed to address the housing crisis will in part have to come from overseas students.

The Government has sensibly announced that from 1 July 2023, work rights for students will again be restricted to 40 hours per fortnight. While this will help to redress the negative impact on the reputation of Australia’s international education industry, it will have an impact on the labour market and on the financial situation of students who have come to Australia expecting to rely on being able to work full time.

The other risk, possibly for the second half of 2023, is if there is a substantial economic downturn and the labour market weakens. That would put a very large number of students and newly arrived skilled migrants in danger of destitution as they have no access to any social support.

By then, the Albanese Government will indeed be juggling a large number of policy hot potatoes.

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