The Australian housing market has been significantly impacted by the recent increase in population, which has led to rising rents and house prices, making it challenging for many Australians to own a home. This situation has sparked a heated debate about whether reducing immigration levels could ease the cost of living in Australia or if immigration is essential for economic growth.

The rapid rate of immigration is a major factor driving the growing demand for housing. Around 500,000 migrants have arrived in Australia over the last year, leading to an increased need for housing. Diana Mousina notes that the current immigration levels are not aligned with the available housing stock. “We are simply not constructing enough residences to match the increase in our population,” Mousina explains. This imbalance between supply and demand has heavily impacted the rental market, contributing to rising inflation.

Australia has consistently struggled to meet housing demand as its population continues to grow. The conversation has shifted towards the impact of immigration on housing, jobs, and infrastructure as home ownership rates decline. The latest report from the Grattan Institute indicates that migration has a small impact on increasing house prices and rents, as wealthy migrants add to the demand for housing. The lack of sufficient housing availability is driving up rental and real estate prices.

Increased immigration has exacerbated the rental crisis, leading to record rent increases and extremely low vacancy rates. Rents now account for around 6 percent of the Consumer Price Index, making it the second most significant factor in the index, according to the Australian Bureau of Statistics. Few policymakers would fail to recognise the link between high immigration levels and rising rents.

Home Affairs Minister Claire O’Neill has announced a series of changes that will see immigration levels fall to 375,000 next year and 250,000 in 2025. Had the new policy not been implemented, migration rates would have remained high, reaching 440,000 the following year and 305,000 the year after. The Grattan Institute predicts a 1% decrease in rents over the next 18 months due to these changes—a minor yet beneficial development.

The government’s immigration plan is designed to make it more challenging for low-skilled workers to obtain permanent residency by reserving it for the most highly skilled individuals. A new visa, the “Skilled Visa,” will replace the current Temporary Skill Shortage Visa, providing a clearer path to permanent residency for highly skilled workers in sectors such as technology and energy. Additionally, a new visa is being introduced specifically for immigrants who drive growth in critical sectors through talent and innovation.

While the increasing immigration rate in Australia is contributing to housing challenges, immigration has long provided significant benefits to society and the economy. To ensure the continued success of Australia’s immigration program, governments need to address the structural issues caused by rapid population growth, particularly in relation to housing. Slowing down immigration may offer a temporary fix for the rental market, but the real solution lies in boosting housing supply. Even with effective strategies, it will take several years to fully resolve the housing shortage. A balanced approach to immigration and housing policy is crucial in addressing the current pressures on the rental market and inflation.

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