The housing market in Australia is a complex beast, and the question of when housing completions will overtake population growth is a tricky one. It's a topic that's been on my mind lately, and I've been thinking about the various factors at play. Here's my take on it, with a healthy dose of personal commentary and analysis.
First things first, let's talk about the current situation. Australia's housing pressures are a result of years of mismatched policies, with falling supply and surging migration. The net migration numbers have been all over the place in recent years, and so have housing completion rates. This isn't a new issue, but it's been exacerbated by the global pandemic and the subsequent labor market shocks.
The peak in dwelling completions was reached in the September quarter of 2018, at 57,192. But then, like a rollercoaster, it took a sharp dive to 42,473 in the March quarter of 2022. This was a result of the government's initial lack of planning to increase housing completions to meet the projected population growth. The Coalition Government's 2019 Budget forecast a massive population boom, but housing approvals were falling, and completions were already in decline.
During the pandemic, net migration took a nosedive, and the fertility rate didn't increase as expected. This led to a further decline in housing completions, which didn't raise any red flags at the time. The major concern was the labor shortage, with job vacancies skyrocketing to over 400,000 in November 2021. The government responded with a series of measures to boost immigration, which, combined with a hot labor market, led to a massive increase in net migration to almost 540,000 in 2022-23.
However, the Labor government's response was a bit too little, too late. They increased the permanent migration program, but it had little impact on net migration. Meanwhile, housing completions continued to fall, from a peak of 55,690 in the September quarter of 2018 to 41,532 in the March quarter of 2022. Commencements also collapsed, and the cost of labor and materials increased rapidly.
The government's response to the labor shortage was to tighten immigration policy, which led to a fall in net migration. But it wasn't enough to meet the Treasury's forecast. The government's mistake of increasing the student planning level for 2026 further exacerbated the situation. Net migration in the September quarter of 2025 increased, and the government had to tighten policy again, introducing higher visa rejection rates and application fees.
So, where does this leave us? Well, the government's forecast of 1.2 million dwellings over 5 years to 2029 and net migration of 225,000 per annum is a tall order. If we assume an average of two people per dwelling and adjust for various factors, the implied housing demand would be around 170,000 dwellings per year. But this is a gradual process, and the lag between commencements and completions means we won't see a material increase in completions until late 2026 at the earliest.
The state of the economy and the labor market are the wild cards here. A global recession or stagflation could lead to a large increase in Australian citizens returning and a decrease in net migration. This would help the government's forecast but could also make life harder for house builders. The labor shortage is likely to persist, and the cost of materials and travel could rise.
In conclusion, the housing market in Australia is a complex issue, and the question of when housing completions will overtake population growth is a tricky one. It's a matter of when, not if, the government's policies and the state of the economy will align to meet the housing demand. But one thing is for sure: it's a fascinating and important topic to keep an eye on.
