Are migrants to blame for Australia's housing crisis?

40 major social service and community housing groups recently came together to pen an open letter to the Prime Minister and Opposition Leader urging them not to blame new migrants for the housing crisis.

The groups included the Australian Council of Social Service (ACOSS), the Federation of Ethnic Communities Councils of Australia (FECCA), National Shelter and the Community Housing Industry Association.

“It is nonsense to blame overseas migration as a primary driver of a housing crisis that has been decades in the making,” says Maiy Azize from Everybody's Home, which coordinated the letter.

“Migrant communities are being scapegoated for Australia’s housing crisis.” 

The letter came shortly after the Federal government announced a sweeping overhaul of the migration system, partly in response to calls to lower immigration to more sustainable levels in the face of soaring rents and a chronic shortage of homes. 

The government says Australia's net migration level probably peaked last financial year at 510,000, on the back of a post-COVID-19 surge in arrivals by international students and temporary workers. 

That’s now forecast to fall to 375,000 this financial year and to 250,000 in 2024-25.

So, are migrants to blame for the housing crisis?

CoreLogic’s Head of Research, Eliza Owen, recently examined data around migration and housing patterns and concluded the large surge in inward migration over the past year was essentially a historical accident.

Referencing the two charts above, she says, “The high level of net overseas migration in the past year is partly a temporary result of the (Federal government’s Covid era) travel ban.” 

“It has been pushed higher by a concentrated number of overseas arrivals in a short space of time, and a 22% drop in departures compared to the historic five-year average.” 

“The record level of arrivals may in part be because of new, and postponed, decisions to come to Australia coalescing,” Ms Owen says.

Eliza Owen argues fluctuations in overseas migration are more likely to impact the rental market than properties for sale, because “housing tenure of migrants skew to rentals in the short term.”  

She points to one of the unexpected consequences of COVID-19:

“A sharp reduction in the number of people per household early in the pandemic added to dwelling demand by around 120,000 households, largely while border restrictions were in place,” she says.

In summary, Ms Owen says, “Limiting temporary migration has economic trade-offs and can be very complex to implement.”

“Higher levels of skilled migration may even help with aspects of the current housing shortages in Australia.”

The buyer’s agent

Eliza Owen's rather nuanced and measured approach isn’t shared by Simon Pressley, the Head of Research at buyer’s agency Propertyology.

“Despite the factually incorrect statements from various economists and other general gum-flappers,” he says, “existing Australians (not new arrivals) are the ones driving competition to buy and to rent real estate.”

Simon Pressley says that overseas migration added a net annual average of around 200,000 people to Australia’s population over the last decade.

He claims this only created demand for 60,000 extra homes over that time.

Mr Pressley also highlights the contrast between migration patterns and house values.   

Over the last 22 years, he says overseas migration added a net 22% to the population of New South Wales, while house prices in that state’s largest city - Sydney - increased by 270%.

It’s a similar story in Victoria, he says, with overseas migration adding a net 25% to the state's population since 2001, while Melbourne house prices have soared 274%.

Simon Pressley claims that when you look at Australia’s best-performing property markets over the last 5 years and the contribution that overseas migration made to their population, “there is no correlation”.

Like Eliza Owen, Simon Pressley references census data about the time overseas migrants take before buying a home.

70% of migrants take ten or more years to purchase a home, whereas “data analysis for the decade ending March 2023 confirms that, of the 493,232 average annual volume of properties purchased in Australia, recent arrivals from overseas purchased approximately 35,000 of them (or 7%).”

He also claims only 3% of rental “tenancy movements” each year are created by overseas migrants.

Who’s to blame?

Propertyology’s Simon Pressley is blunt.

“Anyone who believes overseas migration is to blame for Australia’s rental crisis is a bigot,”

But that’s where he parts company with the community, ethnic, and social service groups who claim migrants have been unfairly blamed for the housing shortage.

Mr Pressley blames a series of policies (or threatened policies) by politicians and bankers since 2014, which he says have helped create Australia’s current rental crisis by discouraging property investors. 

These include a credit squeeze, the foreign investor surcharge, state law reforms that have increased tenant rights, Bill Shorten’s election pledges to curb negative gearing, the COVID-19 eviction moratorium, calls for rent freezes and state land tax increases.

For their part, the coalition of community and service groups blame the shortage of rental accommodation in Australia on “handouts to investors”, “allowing unlimited rent increases”, and governments building inadequate public housing stock.