Housing crisis not all about immigration but a lot of it is
The International Monetary Fund’s (IMF’s) annual review of Australia, criticises both the government’s and the coalition’s approach to dealing with the nation’s housing crisis, but makes no mention of what Macks Advisory believes is key to both the problem’s cause and its solution.
And that’s immigration. The housing crisis is not all about immigration, but a lot of it is. It’s a fixable problem and a rejigged immigration program would go a long way towards fixing it.
The IMF lectures the government thus: “A comprehensive policy package is essential to tackle Australia’s housing affordability crisis, focusing on increasing the construction workforce, relaxing zoning regulations, advancing initiatives to boost new housing supply, and re-evaluating property taxes and stamp duty.”
But how long is all that going to take, even if PM Anthony Albanese, already on the campaign trail preceding the forthcoming election, could summon the political will to guarantee such a package?
We note the IMF likes to trumpet the joys of open borders even though this is a policy some of its members don’t practice. Perhaps this is why its review of Australia excludes any reference to lowering immigration as a possible solution to our housing crisis – despite declaring that “everything should be on the table”.
Coalition also criticised
The IMF criticises coalition proposals to ease lending standards: “Macroprudential policies should remain stringent to protect household balance sheets, especially in the context of rising house prices. Additionally, the authorities are encouraged to proactively adapt their macroprudential tools to pre-empt excessive build-up in household indebtedness, including when the time is appropriate for monetary policy easing.” (Macroprudential authorities monitor a financial system to identify risks and vulnerabilities so that policies can be put in place to prevent these risks and vulnerabilities from increasing and spreading across the system.)
We have no quarrel with IMF recommendations that if implemented would positively affect housing affordability. It is obvious at this crucial time that “everything should be on the table” when considering solutions to our catastrophic housing crisis, yet – it seems to us - the fundamentally relevant issue is immigrations – the fundamentals of the policy needs to be agreed forthwith or without further delay as such a policy its implementation will be determinative of how this country is best proportional to be “the lucky country” it is or should be.
Economists and real estate authorities are saying that excessively high levels of immigration will inevitably push housing affordability disastrously high, particularly for first home buyers and renters.
This is because it generates harmful rent increases, raises house prices making it very difficult for millions of potential home buyers to save enough money for a deposit, and forces millions of people to live in smaller dwellings ever further from a city centre.
This is what’s trending
The latest Population Statement from the Australian Treasury’s Orwellian Centre for Population forecasts that the country’s population will increase by another 4.1m residents during the next decade – most of whom will live in Sydney, Melbourne, Brisbane and Perth.
Australia already has a housing shortage of more than 200,000 dwellings, and the forecast national annual population growth of 410,000 closely equates to the population of Canberra,
If the forecast is correct it would seem to doom the nation for 10 years and probably more to upward pressures on housing rents and prices with demand constantly exceeding supply.
Such a rapid growth in population would worsen existing housing and infrastructure shortages in and around Australia’s biggest cities.
Infrastructure Australia which gives independent, evidence-based advice to the federal government on infrastructure, planning and policies for the benefit of all Australians, warned last month that skill shortages and cost escalations will afflict the sector for years ahead.
Construction materials are already costing property developers on average 30% more than they did three years ago, and the trend is still upwards.
It ‘s worse in the housing industry where building costs have increased 40% in the past five years.
So where is this heading?
There are on-going media reports of major housing and infrastructure companies becoming insolvent to an extent of billions of dollars, leaving thousands of people with unfinished or unviable homes.
This is a situation exacerbated by developers who have projects they want to launch but say they’re postponing because they’re no longer commercially viable.
Founder of Harvey Norman and real estate developer Gerry Harvey is one. He says he has “lots of developments” he wants to do but won’t because he “won’t make any money”.
Indications are that because of the slowing of residential and non- residential building activity towards the end of this year and into 2026, many professional jobs in the industry will be compromised.
Economists are arguing that because the supply curve for homebuilding has shifted to the left – meaning fewer homes are being built at higher cost -- the sensible policy response would be to shift the demand curve to the left to match supply, by limiting net overseas migration to a level comparable to a capacity to build dwellings.
Melbourne faces the arrival of a million new residents during the next decade, Sydney 900,000, and Brisbane and Perth each half a million over the same time span. By 2050 it’s estimated Adelaide’s population will have increased by 670,00 (a 46% rise) which dictates a requirement for 315,000 new homes and 254,000 extra jobs.
Conclusion
Failing any recommendation from the IMF on what Australia might consider doing about updating its immigration program, and failing clarification from any place on the political spectrum about what a revised immigration plan should look like, we can only conclude PM Antony Albanese and would-be PM Peter Dutton could both have a serious issue with voters if they can’t come up with a solution to Australia’s very obvious immigration problem before the forthcoming election that must be held no later than May.
