This research report by NHFIC - COVID-19: Australia's population and housing demand – found that the global pandemic could cut underlying dwelling demand in Australia by between 129,000 and 232,000 from 2020 to 2023, mainly due to the downturn in net overseas migration (NOM). International border closures have effectively shut down NOM, which has 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 NOM. The geographic composition of the student community is also relevant, given COVID-19 hotspots such as India and Brazil are large contributors to the pool of students.
The global financial crisis (GFC) revealed that economic factors, including unemployment and the exchange rate, are important for international students studying in Australia. It took around four years for student numbers to recover to pre-GFC levels. A protracted COVID-19 recession could easily lead to a similar path of recovery once borders reopen.
Large falls in underlying dwelling demand, particularly due to substantial falls in international students, are already putting upward pressure on vacancy rates and downward pressure on rents in inner city suburbs. If sustained, this could cause a contraction in construction activity that will add to the recessionary forces that are impacting the economy.
Previous recessions paint a relatively consistent picture of the outlook for the natural population increase: it tends to decline after the unemployment rate has peaked.
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