Warning Dutton’s housing and migration plans little more than ‘rounding error’

Economists and property industry figures say Opposition Leader Peter Dutton’s pledge to drastically cut permanent migration and ban foreign buyers from the housing market for two years will have a negligible effect on freeing housing supply and could make the nation poorer.

Dutton conceded foreign buyers made up a small part of the housing market but insisted the measure would still increase supply, after putting his alternative pitch to solve the housing crisis in the Coalition’s budget reply on Thursday night.

“The reality is that if you could free 5000 homes up for people to rent or to buy, over the next couple of years, you’d jump at it. Our argument is that through what we’re proposing, you could bring 40,000 homes, free them up over the first year, and over a five-year period, about 110,000,” Dutton told 3AW radio station on Friday morning.

Dutton nominated a ban on temporary residents and foreign investors from buying existing dwellings for two years as the first pillar of his housing strategy during his parliamentary address.

According to the latest data from the Foreign Investment Review Board, more than 6500 people who were neither citizens nor permanent residents were approved for property sales in 2022-23, less than 1 per cent of the properties sold in that year.

The most-recent data relating to foreign buyers’ share of existing properties comes from 2021-22 when 1340 homes were sold.

Opposition Leader Peter Dutton delivers his budget reply speech on Thursday night.Credit: Dominic Lorrimer

The Grattan Institute’s economic policy program director Brendan Coates said it was “pretty clear” changes to foreign investment were not going to have a material impact on housing affordability. “It would be a rounding error on housing prices … we’re talking about a $10.5 trillion housing market,” he said.

Centre for Independent Studies chief economist and former Reserve Bank researcher Peter Tulip said the proposal would have a negligible effect, which would push more people into the rental market instead of buying.

“Shuffling people from one part of the market to the other doesn’t improve the overall shortage, it just reallocates it,” he said.

Foreign nationals are generally barred from buying existing property, but can do so in limited circumstances, such as when they come to Australia for work or study. When they leave the country, they must sell the property if they have not become a permanent resident.

Earlier this year, the government announced it would increase fees for foreigners buying established homes, and increase penalties for those who leave properties vacant, while also creating concessions for foreign investment in build-to-rent.

Dutton also pledged to cut the permanent migration intake from 185,000 to 140,000 in the first two years of a Coalition government “in recognition of the urgency of this crisis”. For temporary migration, he said he would reduce excessive numbers of foreign students studying at metropolitan universities – a solution Labor is already broadly addressing.

Coates said it was unclear what exactly Dutton planned to do with student numbers, but driving down permanent migration would have little impact in the first few years. “The rule of thumb is temporary migration drives short-term population trends, while permanent migration drives long-term population trends,” Coates said.

Coates and Tulip said slowing permanent migration would make housing more affordable but would also make the nation poorer, with Tulip pointing to the effects of reducing international education, worth $36.4 billion to the economy in 2022-23.

“If you stifle our export industries, our standard of living goes down,” Tulip said.

Coates said every 10,000 skilled visa holders in Australia meant about $2.5 billion for the economy.

Labor tipped $12.3 billion into new housing programs as part of its budget, part of which includes $1 billion for the states and territories to build roads and other infrastructure needed to support new developments.

Tulip said both sides of federal politics had neglected to focus on the impact of zoning issues in stymying supply.

University of Melbourne professor Peter McDonald, a long-standing expert on population, estimated that cutting the permanent migration program to 140,000 would mean rejecting about 15,000 to 20,000 skilled workers in professions such as nursing, teachers and engineers.

“Cutting the program will lower the employment-to-population ratio which has held up at high levels in Australia for many years. This means more rapid population ageing and fewer workers per dependent,” McDonald said.

The opposition leader said he expected skilled workers to make up two-thirds of the permanent program and family visas to make up the remaining third. “That’s what we would continue to go on,” he said on the ABC’s 7:30 program.

Applied to a 45,000 cut to the permanent program, that would mean reducing about 30,000 skilled visas and 15,000 family visas. While Dutton claimed this would make 100,000 homes available for Australians over five years, experts disputed the central assertions in his policy pledge.

Master Builders Australia chief Denita Wawn said construction would suffer if the Coalition policy turned away skilled workers. “We would express caution that if you are going to cut migration, do it in a way that does not curtail the economy. It’s as simple as that,” she said.

Property Council of Australia chief executive Mike Zorbas said there was a case to ease migration levels but that this must not stop the arrival of skilled workers.

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