With Australia's housing prices soaring in recent years, public opinion has often blamed immigration. A recent model predicts that if Australia completely halts immigration over the next decade, house prices will not fall but will actually be approximately 2.31% higher in 2035 than if immigration remained at current levels. This result overturns the simplistic assumption that "reducing immigration equals lower housing prices" and reveals a more complex reality in the real estate market.
Supply contraction outstrips demand decline
Housing price trends are driven by both supply and demand. On the surface, a decline in immigration would appear to reduce housing demand and, therefore, cool the housing market. However, the model shows that labor shortages are hitting the construction sector hardest, leading to a faster decline in housing starts and a significant drop in the available supply.
The result is a market where supply is shrinking faster than demand, causing prices to rise even faster. For first-time homebuyers, this undersupply makes it even more difficult to enter the market.
Rising wages push up construction costs
As population growth slows, companies need to raise salaries to attract limited workers. The average wage increase over the next decade could reach 7.51T/T. While this is good news for workers, it increases construction costs and financial pressure on developers in the real estate market.
The rising costs of construction materials and labor have made developers more cautious in launching new projects. Some small and medium-sized projects have even been delayed or cancelled, making the market's new supply even tighter, and prices are naturally difficult to fall.
Long-term impact: Homebuyers become more passive
If immigration declines over the long term, the property market will enter a state of "low supply, high prices." While overall transaction volume may decline slightly, those who can afford to buy will face increased competition and higher prices, and rents may continue to rise due to insufficient supply.
At the same time, the population structure is aging, the housing turnover rate will decline in the future, and market liquidity will deteriorate, which will be detrimental to the overall economic vitality in the long run.
Solution: Simultaneously promote supply and planning
Experts point out that the focus is not on drastically reducing immigration, but on speeding up the release of land, streamlining the development approval process, training construction technicians, and ensuring that the supply chain is not hindered by labor shortages.
If the government can coordinate immigration policies with infrastructure plans, such as coordinating transportation, school and medical facility planning, it can not only disperse population pressure, but also avoid overcrowding in cities, making the property market more stable in the long run.
Optimistic outlook: A healthy property market is still possible
Economists emphasize that immigration inherently brings a young workforce and increased productivity to Australia, contributing to sustained long-term economic growth. If the government can appropriately control the pace of growth and coordinate supply strategies, the property market is expected to return to a healthy balance, rather than falling into a vicious cycle of high prices and low supply.
ANP team: helping you grasp the pulse of the market
For investors and homebuyers, understanding the supply and demand dynamics behind the property market is the first step to success. ANP's team, comprised of urban planners, lawyers, and real estate consultants, provides clients with comprehensive services, from site selection and due diligence to contract review and investment strategy analysis. Combining professional data and on-the-ground research, we help clients seize market opportunities amidst shrinking supply and develop sustainable, long-term property acquisition and investment strategies.
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