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In light of the tight housing market and falling housing affordability, several economists stated that migration control needed to be part of the solution, however, property insights platform CoreLogic found otherwise.
Head of research at CoreLogic, Eliza Owen, said a cap on migration would have trade-offs, as was seen in the aftermath of the halt on migration during the pandemic.
Ms Owen stated: “A temporary cap on migration may relieve housing demand in the short run, but COVID-19 has already demonstrated the longer-term issues with temporary migration caps.
“Because housing demand (the movement of people) is more liquid than housing supply (the construction or acquisition of new housing), the reopening of international borders created a demand shock, which quickly pushed up rents and worsened an already tight rental market.
“The demand shock also came amid constraints on new available supply, as sellers were put off by rising interest rates, and new home completions were delayed by increased material costs and labour shortages.”
Despite the spike in migration since the pandemic, CoreLogic found that there had still been fewer arrivals since COVID-19 than the nation would have had without travel restrictions, with the spike in migration set to normalise in time.
A 22 per cent drop in the departure rate of individuals was also key to the housing affordability problem, according to CoreLogic, with it finding that the “decline in departures is explained by the ABS as a lagging result of fewer arrivals in recent years, which has translated to fewer departures a few years later”.
Ms Owen also argued that migration levels were having an impact on the rental market rather than purchases, with a migration cap unlikely to have an impact on housing affordability.
“ABS data on permanent migrant settlement outcomes showed 60.8 per cent of migrant arrivals in the five years to 2021 were renters,” she said.
Rather than cutting immigration by almost half to 200,000, as previously suggested by AMP’s chief economist Shane Oliver, Ms Owen pointed to the shift in the makeup of households early in the pandemic.
She commented: “A sharp reduction in the number of people per household early in the pandemic added to dwelling demand by around 120,000 households, largely while border restrictions were in place.
“This was also likely enabled by higher household income from government stimulus and low interest rates, which incentivised people to spend on larger homes.”
Ms Owen added that if the government looked to impose migration control as recommended by NAB’s chief economist Alan Oster, in the form of a temporary cap, it would bring more volatility to the market.
“Migration can also be strategic to ensure a more productive labour force, including for the delivery of housing and infrastructure,” she concluded.
[Related: Public housing, migration control needed to address affordability: NAB]
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