Migration shift needed to ease rental crisis, modelling shows

A top property expert has urged government to consider a key policy change to give capital cities time to deal with the ongoing rental crisis.

The federal government should consider a temporary cap on migration to give housing supply time to catch up to the record surge in population growth, one of the country’s top housing market forecasters claims.

Property analyst Louis Christopher, whose firm SQM Research has a strong track record of predicting movements in the housing market, said continuing record migration inflows would prolong the current rental crisis.

SQM Research modelling revealed that a temporary cap on migration numbers would ease conditions in the rental market sooner.

The busy streets in Melbourne.

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Mr Christopher said Sydney, and the rest of the nation, were not building enough houses and units to cater for the record migration.

A temporary cap on migration intake would allow capital cities more time to build the housing needed to cater for strong population growth, Mr Christopher said, noting that the cap could be removed when more housing is built or approved.

He pointed to recent building figures showing the country had about 160,000 builds in the pipeline between 2024 and 2029 - well short of the 240,000 dwellings needed to account for population growth.

Record net migration of over 400,000 people was seen in 2022, compared to pre-pandemic levels of 220,000 in the 12 months to March 2020, according to PropTrack data.

Population growth has continued this year, on top of last years growth.

Population growth has continued this year, with new data released by the ABS showing the pace of growth has accelerated.

“It’s creating shortages,” Mr Christopher said.

“I would strongly argue there should be a short-term cap on migration over the next two years while supply catches up. If we cap migration to 90,000 people over the next two years, the rental crisis would come to an end by the midpoint of 2025, based on our modelling,” he said.

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PropTrack senior economist Eleanor Creagh noted in a report released this week that construction activity had been stunted by inflation driving up financing and materials costs, as well as labour shortages.

Construction activity has been down.

She highlighted the role the growth in migration has played in Australia’s economy.

“Without the strong growth, the slowdown in economic activity would have been sharper. Skilled migrants have also played an important role in filling workforce shortages,” she said.

Although the current faster growth has been maintained in 2023, growth is expected to ease in 2024 and 2025, PropTrack data revealed.

Increase population is only one factor effecting Australia’s housing crisis.

Ms Creagh said solutions to the housing crisis are ‘multi-pronged’.

“Challenges for developers and planning rules are key impediments for growing supply,” she said.

Making use of under-utilised space in existing homes is another way to address housing supply, Ms Creagh suggested.

“A combination of fast-tracking new supply of more of the right type of homes built where people want to live, and policies that encourage better use of existing homes can help ease supply constraints,” she said.

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Originally published as Migration shift needed to ease rental crisis, modelling shows