The Australian economy isn’t the only thing that has been shut down in 2020. So too has migration to Australia. The impacts of COVID-19 has seen our borders shut to overseas arrivals and with these migrants ceasing to arrive, what will the flow on effects be to the Australian housing construction industry?
In the past five years, Sydney and Melbourne have each had over 100,000 new residents arrive each year. And that growth in residents has provided a sizable chunk of the demand for new housing as after all, they need to live somewhere. Many of these new arrivals are skilled workers whose skills are needed in the capital cities.
Federal Treasury is now predicting a record low population growth of just 0.2 per cent in 2020-21 and 0.4 per cent in 2021-22. And as revealed in the most recent budget papers, this change is a “permanent lowering of the medium-term rate of population growth”.
With fewer migrants, there will be less demand for new homes, that is certain. Such is the expected extent of the fall, that the National Housing Finance and Investment Corporation estimates that the demand for new housing will drop by around 40,000 a year for the next three years.
The construction industry is a significant driver of the national economy, evidenced by the fact it was one of the few industries that remained open throughout the wholesale closure of businesses across the country. If the construction industry were to slow significantly, this could pose a significant risk to Australia’s economic recovery and growth out of the recession.
Whilst the international borders will eventually open, there will be a lag and government support will no doubt be needed to keep the industry robust and viable into the future.
One potential area of focus could be social housing. Currently there nearly half a million people on waiting lists for social housing so this could be one area where the fall in demand from overseas migration could in part make up the shortfall.
One thing is for sure, the next five years is going to be a whole lot different to the past five.