Australia’s housing pressures reflect years of mismatched policy – with falling supply colliding with surging migration and labour market shocks.

Just like the large fluctuations in net migration in recent years, Australia has also gone through large fluctuations in housing completion rates. The issues go back to well before Covid.

In seasonally adjusted terms, dwelling completions peaked in the September quarter of 2018 at 57,192 and fell sharply to 42,473 in the March quarter of 2022. In the 2019 Budget (the Back in Black budget), the Coalition Government was forecasting the largest sustained population growth (in absolute terms) in Australia’s history with net migration averaging around 270,000 per annum over ten years and an increased fertility rate of 1.9 births per woman.

At the time, there was no plan to increase housing completions to meet that level of forecast population growth. In seasonally adjusted terms, housing approvals had fallen from 23,059 in November 2017 to 13,392 in July 2019. While housing approvals increased sharply during Covid, peaking at 23,040 in March 2021, housing completions continued to fall. With negative net migration and virtually no population growth during Covid, builders may have thought ‘why keep building houses?’

As net migration fell into negative territory during Covid and the fertility rate fell rather than increasing as forecast, the decline in house completions did not create any particular concern. Indeed, the major concern in the second half of Covid and during 2022 was focused entirely on labour shortages.

Having fallen sharply at the start of the pandemic to 124,500 in May 2020, job vacancies then increased at a phenomenal rate exceeding 400,000 in November 2021 and eventually peaking at a record 475,000 in August 2022.

The Coalition Government responded with unprecedented measures to boost immigration, including fee free visa applications for students and working holiday-makers, unrestricted work rights for students, easing of work restrictions on working holiday-makers, introduction of the option of a third working holiday-maker visa and introduction of the Covid visa for almost any temporary entrant who wanted to remain in Australia.

The combination of a very hot labour market and these unprecedented measures to attract students and working holiday-makers, led to net migration booming to almost 540,000 in 2022-23. The new Labor government did not begin policy tightening to bring net migration back under control until mid-2023. Indeed, the government was under pressure right through 2022 from both the business community and the Coalition to accelerate the increase in immigration to address huge labour shortages.

In response the Labor government increased the permanent migration program from 160,000 in 2021-22 to 195,000 in 2022-23. But that had relatively little impact on net migration as the bulk of the permanent program was sourced from people already in Australia long-term.

At the same time as we were moving into a massive labour shortage and record net migration, housing completions fell from a seasonally adjusted peak of 55,690 in the September quarter of 2018 to 41,532 in the March quarter of 2022. Commencements collapsed from a seasonally adjusted 66,627 in June 2021 to 37,881 in September 2023. The collapse was partly due to a rapid increase in costs with the value of work completed rising from a seasonally adjusted $38,242.1 million in June 2022 to $43,241.3 million in September 2025. Both the cost of labour and materials had increased rapidly.

From July 2023, the government began tightening immigration policy leading to a fall in net migration to 430,000 in 2023-24 and 305,000 in 2024-25. Treasury is forecasting net migration to fall further to 260,000 in 2025-26 and 225,000 in 2026-27.

On this basis, the government appeared to be of the view in mid-2025 that this downward trend would continue to the degree that it announced a 25,000 place increase in the student planning level for 2026. That was a clear mistake.

Net migration in the September quarter of 2025 increased to 87,821 from 81,642 in the September quarter of 2024. It is likely net migration in the December quarter of 2025 will also have strengthened.

A nervous government responded by again tightening policy from late 2025. It massively increased offshore student visa rejection rates, doubled the visa application fee for temporary graduates and introduced significantly more scrutiny of nominated positions for the training visa.

That should ensure net migration in the March and June quarters of 2026 is weaker than in the equivalent quarters of 2025. But it’s unlikely to be enough to get net migration in 2025-26 down to Treasury’s forecast of 260,000. It is also unlikely to be enough to get net migration down to 225,000 in 2026-27. The government will need to tighten further.

If the government is able to get net migration down to the current Treasury forecast of 225,000 for 2026-27 and assuming natural increase of around 115,000 per annum, the implied housing demand would be around 170,000 dwellings per year. This assumes an average of two people per dwelling and does not take into account the composition of the intake. The implied housing demand would be a little higher if adjusted for house demolitions and the building of new holiday homes and a little lower if there was an expansion in the intake of partner visa holders.

New dwelling commencements increased by 11.6 per cent year-on-year to 48,778 (seasonally adjusted) in the September quarter of 2025 – the latest available reporting period. This suggests the housing pipeline is strengthening but from a low base. A sustained recovery in completed supply is still likely to be only gradual. Given the lag between commencement and completion (typically 9–15 months for houses, longer for apartments), this improvement in commencements will not translate into a material increase in completions until late 2026 at the earliest.

If the government’s forecast of housing completions (ie 1.2 million dwellings over 5 years to 2029) and net migration of 225,000 per annum was delivered, we would see a period of years from 2027 where housing completions substantially exceed population growth. But we are still a long way from that.

The other big unknown is the state of the economy and the labour market. If Trump’s war delivers a global recession (and possibly stagflation as the oil crises of the 1970s did), we may see a large increase in Australian citizens returning, NZ citizens departing and lower net migration of other groups. It would help the government deliver on its net migration forecasts but may also make life harder for house builders with another rise in costs of materials and travel. The shortage of tradies is likely to remain.

A deep recession would make delivering the government’s house completion target more difficult than delivering its lower net migration forecast.