Global pandemic to cut Australia’s demand for housing
The global COVID-19 pandemic could cut demand for housing in Australia by between 129,000 and 232,000 dwellings over the next three years based on a range of scenarios, according to new research released today by the National Housing Finance and Investment Corporation (NHFIC).
NHFIC’s latest targeted research report COVID 19: Australia’s population and housing demand found:
- International border closures have effectively shut down net overseas migration, which accounted for 59 per cent of population growth since 2007
- The most pessimistic scenario implies a reduction in the population increase – from peak to trough – of 214,000 from 2019 to 2021. This implies a decline of 0.8 per cent of the population over the two-year period, which has only been surpassed by World War I and the unwinding of the peak of the baby boom in 1971
- International students are the swing factor, accounting for 50 per cent of net overseas migration. The geographical composition of Australia’s international students is relevant as current COVID-19 hotspots such as India and Brazil are large contributors to Australia’s pool of students
- Evidence from the global financial crisis suggests economic factors, such as the unemployment rate and the exchange rate are also important for international students in selecting Australia. It took around four years after the global financial
- crisis for student numbers to recover to pre-GFC levels
- Large falls in underlying dwelling demand are already putting upward pressure on vacancy rates and downward pressure on rents, particularly in some inner-city areas. If sustained, this could cause a contraction in construction activity that would add to the recessionary forces impacting the economy. (Underlying dwelling demand measures the impact of demographic factors such as population growth on the number of dwellings needed to meet that demand)
- The past two recessions show that rising unemployment tends to lead a decline in natural population growth. Australia’s second wave of infections is likely to further slow population growth, adding to the depth of the downturn and hindering the pace of recovery in underlying housing demand.
NHFIC CEO Nathan Dal Bon said, “This research highlights the strong relationship between population growth, increasingly through net overseas migration, and underlying dwelling demand with the outlook for population growth due to COVID-19 highly uncertain.”
The COVID-19: Australia’s population and housing demand report will be followed by a webinar on 29 September 2020, where demographer Bernard Salt will present NHFIC-commissioned research examining the impact of the COVID-19 pandemic on employment, market sentiment and housing demand. The webinar will be hosted by NHFIC CEO Nathan Dal Bon and NHFIC’S head of Research Hugh Hartigan.