Coronavirus: lack of migrants ‘to slash construction’

More than 230,000 dwellings will no longer need to be built as border closures and recession cause population growth and immigration to slump.

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More than 230,000 dwellings will no longer need to be built as border closures and recession cause population growth and immigration to slump, posing a threat to the construction sector, according to new modelling by the Nat­ional Housing Finance and Investment Corporation.

The COVID-19 pandemic could cut underlying demand for new private houses and apartments in Australia by between 129,000 and 232,000 over the next three years, according to research released on Monday.

“Large falls in underlying dwelling demand are already putting upward pressure on vacancy rates and downward pressure on rents, particularly in some inner-city areas,” the report said. “If sustained, this could cause a contraction in construction activity that would add to the recessionary forces impacting the economy,” it added.

Between March and July, rental listings more than doubled in parts of inner-city Melbourne and Sydney, and increased 60 per cent in central Brisbane.

Advertised rents in Melbourne’s CBD have dropped more than 20 per cent, while they have fallen almost 25 per cent in Darlinghurst, in Sydney’s inner east.

The report, which doesn’t see the flow of international student arrivals returning to pre-COVID levels until 2027, will add to the gloom for a construction sector already hamstrung by lockdowns in Victoria and fuel calls for further support from governments.

“It took around four years for student numbers to recover after the GFC,” the report noted. “A protracted recession could easily lead to a similar path of recovery once borders reopen,” it added, noting many students came from coronavirus hotspots such as India and Brazil.

The Property Council on Monday called on the government to extend HomeBuilder, which provides a grant of $25,000 to owner-occupiers undertaking eligible building work, until July next year, pointing out that about 134,000 people were directly employed in residential construction, which made up about 5 per cent of GDP.

“We cannot avoid the inescapable and profound economic impact of keeping our international borders closed to migration,” said Property Council chief executive Ken Morrison.

Closure of the international border, which the Reserve Bank doesn’t expect to reopen until July next year, has seen net overseas immigration, which accounted for 59 per cent of population growth since 2007, collapse.

International students have accounted for about 50 per cent of net overseas migration, which in turn has averaged about 240,000 a year for the past 15 years. About 760,000 international students were studying in Australia at the end of last year.

“This is nearly equivalent to the combined populations of Tasmania and the Northern Territory,” the report said.

“Migration always has been and will continue to be one of the big drivers of our economic growth and prosperity, and needs to be front and centre in our economic recovery plans,” Mr Morrison said.

The total population increased 375,000 last year, according to the Australian Bureau of Statistics’ estimates.

NHFIC’s most pessimistic scenario sees the annual increase falling to 221,000 in 2021 and 176,000 by 2023, before gradually increasing.

Nathan Dal Bon, chief executive of NHFIC, said the outlook for population growth was “highly uncertain”.

In July, almost 14,000 new apartments and houses were approved for construction, which was 12 per cent higher than in June and 6 per cent higher than July 2019.