The key population statistics that impact housing

You may have seen in the news recently that Australia’s population has officially passed 27 million.

The latest quarterly Australian Bureau of Statistics (ABS) show that the population was 27,122,411 as of the 31st of March 2024.

Over the 12 months to the end of March, Australia’s population growth rate was 2.3%, with all states and territories experiencing positive population growth over the year.

That doesn’t sound like much on the face of it, but that’s adding an extra 615,300 people - or the population of Canberra and Hobart combined - to the country in just a year.

What the ABS terms the “annual natural increase” (that’s the number of births in a year minus the number of deaths) was 105,500.

But again, the overwhelming boost to the population (83%) came from net overseas migration or NOM.

That’s the difference between the number of international arrivals staying longer than a year in Australia, and the number of long-term and permanent departures.

That number was 509,800 in the year to the end of March.

Annual net overseas migration for the year to end of the previous quarter (December 2023) was 541,000 so, as the graph above shows, there appears to be a downward trend which perhaps indicates that the huge population spike we saw after Australia’s international borders reopened is beginning to moderate.

Population forecasts wrong

So, does this mean the current housing crisis is going to ease?

I’m afraid not.

Under mounting pressure to address acute shortages in the housing market, which has sent rents and home prices soaring despite the highest interest rates in 12 years and a cost of living crisis, the Albanese government pledged earlier this year to curb overseas migration, including cutting the number of international students.

However, its predicted NOM figure for the 2023-24 financial year has already blown out.

The budget in May forecast NOM would be 395,000 for the 2023-24 financial year, but the latest release from the ABS shows the total for the three quarters to March was already 388,000.

Treasurer Jim Chalmers has now admitted the budget forecasts were wrong.

“When it comes to arrivals, we’re more or less tracking as we expected, but when it comes to departures, that’s been the big difference,” he recently told Sky News.

“That’s why there is likely to be a revision of those net overseas migration forecasts because of those fewer departures.”

So already, we have seen the Federal government’s attempt to slow Australia’s population growth from overseas migration exceed its new target.

Housing

The other side of this equation is where new arrivals will live and the pressure this puts on an already stressed housing market.

With an average household size of just under 2.5 people, to house around 600,000 new residents each year, Australia needs to build around 240,000 dwellings annually.

That’s exactly the average number of homes that need to be built each year under the National Housing Accord target - the agreement between the Federal and State governments and the building industry to build 1.2 million new homes by mid-2029.

However, the embattled construction industry is currently not capable of building enough homes to come anywhere near that.

According to the ABS, in the year to the end of March 2024, just 171,667 new homes were completed in Australia.

That’s not keeping up with existing demand before even starting to address the housing shortfall.

Recent research by AMP’s Chief Economist Shane Oliver argues there’s been a significant undersupply of housing in Australia for almost twenty years.

“The supply of new dwellings has not kept up with demand due to strong population growth since the mid-2000s and more recently with record population growth resulting in an accumulated shortfall of around 200,000 dwellings at least but possibly as high as 300,000 if the reduction in average household size that occurred through the pandemic is allowed for,” Dr Oliver says.

Student accommodation

Around 50% of Australia’s annual migration intake is made up of international students.

Universities and higher education providers have been arguing against government caps on student numbers, arguing they have very little impact on the private housing market.

They often cite a report by the Student Accommodation Council (an arm of the Property Council of Australia), which claims that only 4% of renters in the private market are international students.

However, the Federal Education Department recently released a fact sheet that says that figure is actually more like 7%.

It turns out the Student Accommodation Council report figures are based on numbers from the 2021 Census when Australia’s international borders were still closed.

“According to ABS 2021 Census data, on Census night, there were 363,900 student visa holders in Australia”, the Education Department fact sheet says.

However, as of July 2024, there were 696,162 student visa holders.

“All other things being equal, this means that the 4% national average figure based on the census would be more like 7% based on 31 July 2024 figures”, the fact sheet says.

The take out

So what do all these numbers tell us?

Firstly, Australia’s population is still growing very fast by historical standards.

Government attempts to slow net overseas migration to ease pressure on the housing market so far appear to have had only limited success.

International students, who make up half of Australia’s migration intake, are also utilising more housing in the private rental market than had previously been estimated.

All this comes at a time when Australia already has an accumulated shortfall of around 200,000 to 300,000 homes.

The housing supply versus demand equation is not going to get better any time soon.