Australia’s housing pressures reflect years of mismatched policy – with falling supply colliding with surging migration and labour market shocks.

Just like the large fluctuations in net migration in recent years, Australia has also gone through large fluctuations in housing completion rates. The issues go back to well before Covid.

In seasonally adjusted terms, dwelling completions peaked in the September quarter of 2018 at 57,192 and fell sharply to 42,473 in the March quarter of 2022. In the 2019 Budget (the Back in Black budget), the Coalition Government was forecasting the largest sustained population growth (in absolute terms) in Australia’s history with net migration averaging around 270,000 per annum over ten years and an increased fertility rate of 1.9 births per woman.

At the time, there was no plan to increase housing completions to meet that level of forecast population growth. In seasonally adjusted terms, housing approvals had fallen from 23,059 in November 2017 to 13,392 in July 2019. While housing approvals increased sharply during Covid, peaking at 23,040 in March 2021, housing completions continued to fall. With negative net migration and virtually no population growth during Covid, builders may have thought ‘why keep building houses?’

As net migration fell into negative territory during Covid and the fertility rate fell rather than increasing as forecast, the decline in house completions did not create any particular concern. Indeed, the major concern in the second half of Covid and during 2022 was focused entirely on labour shortages.

Having fallen sharply at the start of the pandemic to 124,500 in May 2020, job vacancies then increased at a phenomenal rate exceeding 400,000 in November........

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