The stark decline in net overseas migration will severely disrupt residential construction, economists have warned.
The number of long-term immigrants is expected to fall by more than 300,000 over the next 18 months, with population growth set to slow by 50 per cent.
Lower net overseas migrations means less economic activity, slower GDP growth and less demand for housing, Commonwealth senior economist Gareth Aird said.
“Underlying demand for new housing has been running at about 185,000 dwellings per year—on the assumption of 2.1 persons per dwelling.
“But with population growth set to drop 185,000, the demand for new housing plummets to 90,000.”
Adding to the concern from the Housing Industry Association that falling demand for new housing will put around 500,000 construction jobs at risk, Aird said that Australia is particularly dependent on migration as a growth driver.
“Australia will feel the impact more than most other jurisdictions, [residential] construction and some parts of the education sector in particular will be hit hard.”
Corelogic head of research Eliza Owen said that the operating environment for the housing market has completely changed.
“On aggregate, the Australian housing market is now on the cusp of another downturn.
“New housing demand is likely to see a continued decline as borders remain closed to overseas migration and unemployment rises.”
Ongoing volatility in transaction activity has prompted the data provider to suspend its daily dwelling values index.
“We continue to observe material reductions in the volume of property transactions underpinning the index, creating additional volatility in the daily reading,” Corelogic said in a statement this week.
“A robust volume of timely sales evidence is a critical component of accurately estimating the value of residential properties.”
In its May minutes, the Reserve Bank board said that sluggish population growth will affect demand for housing for an extended period.
“Social distancing restrictions on home inspections and in-person auctions, as well as heightened uncertainty about the future, had significantly reduced turnover in the established housing market.
“At the same time, the supply of rental housing had been boosted as properties that had previously been offered as short-term accommodation were shifted to the long-term rental market.”