Australia needs to cut annual migration by almost 120,000 to improve housing affordability as the nation has “clearly failed” to match immigration to what the property market can handle, a leading economist has declared.
Business leaders have called for a reduction in the immigration rate as housing constraints plague millions of Australians.
Treasury forecasts net migration to sink to 260,000 in 2025-26, however, Commonwealth Bank of Australia’s CEO Matt Comyn called for migration to fall to about 180,000.
EQ Economics managing director Warren Hogan said a halt on migration was essential for the strength of Australia’s critical services, while the Coalition looks to reduce the annual net migration intake by at least 100,000.
AMP’s chief economist Shane Oliver laid out four methods to fix housing affordability and stressed tackling the imbalance between migration and housing was top of the list.
“Match the level of immigration to the ability of the property market to supply housing and reduce the accumulated housing shortfall of around 200,000-300,000 dwellings,” Mr Oliver said in a note.
“We have clearly failed to do this since the mid-2000s and particularly following the reopening from the pandemic, and this is evident in the ongoing supply shortfalls.
“Our rough estimate is that immigration needs to be cut back to around 200,000 a year from 316,000 over the year to the March quarter.”
Migration soared after the pandemic with the nation’s migrant intake sitting at 536,000 in the 2023 financial year before dropping to 446,000 in 2023-24.
In the years following the 2026 financial year, Treasury predicts the migration rate will sit a 225,000 and stay there for the remainder of the decade.
Outside tackling immigration, Mr Oliver called on the nation to build more homes as Labor falls behind its promise to construct 1.2 million homes over five years.
The Albanese government has only overseen the construction of 174,000 homes in its first year and approvals are only facilitating about 190,000 homes annually.
“We are well below the implied 240,000 annual target,” Mr Oliver said.
“To meet the target will require relaxing land use rules, less red and green tape, shifting to faster ways to build including with modular and pre-fab homes, encouraging build to rent affordable housing, training and importing far more tradies and refocussing more on units.
“In terms of the latter the only time we consistently built more than 200,000 homes per annum was in the unit building boom of the 2015-19 period.”
He also called for boosting regional housing supply and decentralising to rural areas alongside implementing tax reform aimed at making housing more affordable.
This includes replacing stamp duty with land tax to make it easier for empty nesters to downsize and reducing the capital gains tax discount.
The latter suggestion would help remove a pro-speculation distortion that pushes investors into purchasing more homes in the housing market.
