The global COVID-19 pandemic could cut demand for housing in Australia by between 129,000 and 232,000 dwellings over the next three years, according to new research released today by the National Housing Finance and Investment Corporation (NHFIC).
NHFIC’s research found that border closures have “effectively shut down net overseas migration”, which has been responsible for 59 per cent of Australia’s population growth since 2007.
The pessimistic end of the range of scenarios will see a decline of 0.8 per cent in population increase between 2019 and 2021 – a fall only surpassed by World War I and the unwinding of the baby boom peak in 1971.
International students account for 50 per cent of new overseas migration and current COVID-19 hotspots such as India and Brazil are large contributors to Australia’s student population.
This, coupled with our rising unemployment rate, will hamper population growth.
The report notes that it took four years after the GFC for student numbers to recover.
“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 says.
“If sustained, this could cause a contraction in construction activity that would add to the recessionary forces impacting the economy.
“The past two recessions show that rising unemployment tends to lead a decline in natural population growth.
“Australia’s second wave of infections is likely to further slow population growth, adding to the depth of the downturn and hindering the pace of recovery in underlying housing demand.”
NHFIC CEO Nathan Dal Bon said the research highlights the strong relationship between population growth, “increasingly through net overseas migration, and underlying dwelling demand with the outlook for population growth due to COVID-19 highly uncertain”.