Australia's housing market is broken. Millions of citizens struggle to find affordable rentals, while hopeful buyers are priced out of the market by rising costs. While many blame high interest rates or the lack of new home builds, finance commentator Alan Kohler points to a different driver: the national immigration system. Kohler argues that government policy has treated population growth as a simple economic fix, ignoring the physical reality of the housing market. By bringing in more people than the country can house, the government has inadvertently created a massive supply-demand gap.
This article examines Kohler’s analysis of how Australia's immigration strategy directly impacts housing costs. By looking at the mechanics of supply, the speed of construction, and the economic model of population-driven growth, we can see why current policy has failed to keep pace with the needs of the Australian people.
The Unintended Consequences of High Immigration on Housing Demand
Alan Kohler’s central argument is that Australia’s sustained high immigration intake has placed an unsustainable strain on the nation's housing stock. Population growth directly translates into demand. If you add hundreds of thousands of people to a country every year without building an equivalent number of homes, prices will go up. It is a simple matter of math that the government has failed to account for.
Population Growth and Housing Unit Requirements
The relationship between immigration and housing is straightforward. Every new person needs a bed. When you calculate the number of new arrivals, you must also calculate the average household size to determine how many new dwelling units are required to keep the market stable. For decades, Australia’s intake targets have significantly outstripped the number of new homes approved for construction. The demand side is governed by visa numbers set by the government, while the supply side is governed by the slow, grinding reality of urban planning and construction.
The Lag Effect in Housing Supply
The housing market has a built-in delay. You cannot build a home as fast as you can issue a visa. From the moment a need is identified, it takes years to get the land rezoned, the designs approved, the financing secured, and the actual construction finished. Kohler notes that the government has treated housing as an afterthought. They set immigration levels to boost economic output without ensuring the physical infrastructure was ready to hold the people arriving. Because supply cannot pivot as quickly as policy, the market remains in a state of constant, desperate shortage.
Impact on Rental Markets and Vacancy Rates
This shortage hits the rental market the hardest. When housing supply is low and demand is high, rents skyrocket. Vacancy rates in most major Australian cities have hovered at historic lows for years, leaving renters with little choice and no leverage. This impacts low-income families most severely, as they compete with a larger pool of residents for a stagnant number of units. The result is a shift in wealth from renters to property owners, widening the gap between those who own homes and those who are stuck in the rental trap.
Examining Australia's Immigration Policy Settings
The scale of Australia's immigration program has shifted over time, moving toward a heavy focus on skilled migration. While this is often framed as a way to fill labor shortages, Kohler questions the economic logic behind it. If the immigrants brought in to fill jobs cannot find a place to live, or if they take jobs that do not improve the nation’s overall productivity, the strategy fails.
Historical Trends in Immigration Intake
Australia has historically relied on immigration to drive its economy. In the past, this helped build the country. However, recent years have seen a massive surge in net overseas migration. The government has prioritized high intake numbers to keep the economy growing and to fill specific skill gaps in the workforce. This model assumes that population growth is always good for the economy. Kohler argues that this is a dangerous assumption if the necessary housing and infrastructure do not follow.
The Role of Skilled Migration and Family Reunification
Both skilled migration and family reunion programs contribute to the total demand for housing. A skilled migrant arriving for work requires a home, just like a family member joining their relatives. When these visa categories are maximized to reach high population targets, the stress on the housing market increases immediately. There is little differentiation in policy between a migrant who can enter the market to build homes and one who competes for existing stock.
Immigration-Fueled Growth vs. Sustainable Development
Kohler often critiques what he calls a "population Ponzi" model. This is an economic approach that relies on constant population growth to keep consumption levels high. The idea is that more people mean more spending, which keeps the GDP rising. But if that growth happens without sufficient planning for housing, schools, and hospitals, the quality of life for existing residents declines. Sustainable growth should prioritize the ability of the nation to support its people, rather than just hitting a target number on a visa report.
The Direct Link: Immigration and Property Prices
The economic principle of supply and demand dictates that when the number of buyers or renters increases faster than the number of homes, prices rise. This is not a complex mystery; it is the basic function of the property market. Immigration acts as the primary demand driver in this equation.
Basic Economic Principles: Supply and Demand in Housing
In any city, if you add more people to the population without adding more homes, the price of the existing homes will go up. This is because housing is a basic necessity. People will sacrifice other spending to pay for shelter. When the government artificially boosts demand through high immigration targets, it places a floor under property prices and forces them higher, regardless of what the broader economy is doing.
Empirical Evidence: Correlation Between Immigration and Price Rises
Data shows a clear link between periods of high net migration and spikes in property values. While other factors like interest rates and tax incentives (such as negative gearing) play a role, the correlation with immigration levels is unmistakable. In years where migration surged, housing price growth accelerated in major cities. This suggests that while policy changes elsewhere might help, you cannot solve a supply crisis while ignoring the biggest demand factor: immigration.
Specific Case Studies: Cities Under Pressure
Sydney and Melbourne act as the clearest examples of this pressure. As the primary landing points for most migrants, these cities have seen their housing markets reach extreme levels of unaffordability. The strain on their rental markets and the intense competition for entry-level homes are directly tied to the speed at which their populations have grown. When the city’s population expands by more than the number of new dwelling completions, the price of the remaining stock inevitably climbs.
Broader Societal and Economic Impacts
The housing crisis is not just a problem for investors or renters. It has deep implications for the future of Australian society and the economy as a whole.
Affordability Crisis and Intergenerational Inequality
The current state of the market creates a massive divide between generations. Older Australians, who were able to buy homes when prices were lower, are seeing their wealth grow as prices rise. Younger Australians, meanwhile, face a future where home ownership is becoming a privilege for the wealthy rather than a standard milestone. This creates a permanent class of renters and erodes the idea of the "fair go" that has been central to the Australian identity.
Strain on Infrastructure and Public Services
Housing is only one part of the problem. When population growth outpaces infrastructure, the whole system suffers. Public transport becomes overcrowded, wait times for healthcare increase, and schools reach maximum capacity. By focusing only on the economic gain of immigration, the government has failed to account for the social cost of a population that is growing faster than the roads, pipes, and public services can manage.
Economic Growth vs. Quality of Life Debates
We must ask what we want our country to be. Do we want a larger economy based on constant population growth, or do we want a high quality of life for the people already here? Kohler’s analysis suggests that we cannot have both if we ignore the physical limitations of our cities. True economic prosperity should be measured by the well-being of the population, not just the total number of people living in the country.
Towards a More Balanced Approach: Policy Considerations
Addressing the housing crisis requires more than just building more houses. It requires a hard look at the levers that have created the imbalance in the first place.
Reassessing Immigration Intake Levels
The most direct lever the government has is the immigration target. Adjusting these levels to align with the country's actual capacity to provide housing and infrastructure is a necessary step. This does not mean closing the borders, but it does mean choosing a pace of growth that the housing market can support. If we cannot build enough homes for 400,000 new residents a year, then we should not be bringing in 400,000 residents until we can.
Investing in Housing Supply and Urban Planning
While managing demand is key, we also need to get better at increasing supply. This means more than just building luxury apartments. We need policies that encourage diverse, affordable housing and more efficient urban planning. Streamlining the approval process, investing in regional growth, and providing incentives for builders to focus on starter homes are all essential pieces of the solution.
Integrated Policy Making
The biggest failure has been the disconnect between immigration policy and housing policy. Immigration is set by one department, while housing is left to the states and the private sector. We need a holistic approach where immigration targets are capped by the available housing and infrastructure capacity. This requires long-term planning that looks ahead to ensure that if we want to grow the population, we have the homes ready to welcome them.
Conclusion
Alan Kohler’s analysis brings a dose of reality to a debate often clouded by ideology. The link between immigration policy and the housing crisis is undeniable. By treating population growth as a simple economic fix, the government has neglected the physical needs of its residents, leading to a shortage of housing that has driven prices and rents to breaking points.
The solution is not simple, but it is necessary. It requires a shift toward evidence-based policy that prioritizes long-term sustainability over short-term growth numbers. We need a system that integrates immigration levels with the reality of our housing supply. Only by balancing our economic goals with the need for an affordable, high-quality life for all Australians can we move toward a future where housing is accessible for everyone. It is time for policymakers to stop ignoring the math and start planning for a sustainable, balanced future.
Excessive immigration over many years is one of the main causes of Australia's housing affordability issues, and the issue with immigration is that the government has little control over it.
Universities and colleges, who view newcomers as clients rather than migrants, have taken up the majority of Australia's migrant intake.
They recruit them through "education agents" in other nations, encouraging them with sales commissions.
Additionally, some agents mostly offer visas rather than schooling. They resemble lawful people smugglers in certain ways.
2001: An Odyssey of Housing
The Howard administration subtly made two changes to it on July 1, 2001, laying the groundwork for this.
The Minister of Immigration was Philip Ruddock.
By the way, that was nine months after the capital gains tax was lowered by fifty percent, which caused an instant increase in the demand for real estate by investors.
It took a few years for the changes pertaining to foreign students to take effect, but they did: Australia's total migrant intake increased to almost 300,000 annually between 2005 and 2008.
On July 1, 2001, two changes were made: first, entry from "non-gazetted" nations, such as China, India, and Pakistan, was made easier after previously being nearly impossible. This was a reiteration of the White Australia Policy, and second, there was a more open and transparent path to permanent residency for international students.
Australia "went through a permanent transformation."
According to Abul Rizvi's book Population Shock, an Immigration Department official at the time, the measures were intended to "delay the rate of population ageing and push back the day that deaths would start overtaking births in Australia."
However, he continues: "The media hardly noticed the changes since they were so minor." They were focused on more sexy, attention-grabbing subjects.
"However, Australia was irreversibly altered by the July 1, 2001, revisions to the immigration laws."
Two other sets of changes were implemented by subsequent Coalition governments: in 2012, the risk rating was moved from countries to providers, and in 2022, Alex Hawke, the immigration minister at the time, removed the application fee for visas and gave students the ability to work without restrictions (it had previously been set at 20 hours).
After twenty-three years, it is clear that Australia has undergone a permanent transformation.
Crisis in housing
In addition to having a thriving multicultural society, well-funded universities, and steady population growth, we currently face a severe housing issue and will never experience a recession.
According to the current Labor administration, institutions should not be determining Australia's population growth based on their drive for profit because they have become dependent on international students.
The national interest should guide the government's management of it, particularly during a housing scarcity.
However, it is not as simple as it seems to make it happen. For starters, education currently employs a big number of people and is our major non-mineral export.
Universities also desperately need the money if government support is cut off; without international students, research would stall and the country's scientific endeavors would suffer.
Additionally, international students do not raise the cost of family homes or reside in suburban three-bedroom homes.
By assigning a specific number to each institution, which is based in part on the accommodations each offers, the government now seeks to limit the number of international students admitted.
Universities face challenges
Universities are fiercely protesting, claiming that 46,000 jobs are at stake and requesting that the plan include at least 39 public universities in the country. Even business associations have cautioned that it might trigger a recession.
Additionally, they have already begun distributing their offers for the upcoming year, and if they have to start pulling them, they risk pandemonium and harm to their brand.
Finding a fair number for each of Australia's around 1400 tertiary education providers is a bureaucratic nightmare.
It is extremely challenging to understand migration data because so few people are aware of what is happening.
A statistical problem
The ABS informed us last week that there were 469,140 net permanent and long-term (NPLT) entries into Australia in 2023–24, which is 12 months until the end of June. This figure is calculated by subtracting 641,000 permanent departures from 1.1 million arrivals.
We do not know how many students were among the NPLT arrivals or departures, but long term is defined as greater than 12 months, therefore it includes students.
We are aware that in 2023–2024, 375,000 temporary visas were granted to international students, and an additional 110,000 were granted to graduates, the majority of whom were from prior years. Additionally, 100,000 temporary skilled visas (formerly 457 visas) and 235,000 working holiday visas were awarded.
Thus, 820,000 temporary visas were issued in total last year. The ABS reported 1.1 million permanent and long-term arrivals last week, which almost equates to the 210,000 permanent migration permits issued in that year, which were divided among skilled, family, and humanitarian entries (some immigrants would have received their visas in the previous financial year).
By the way, permanent migration is capped, but the intake of temporary migrants is uncapped and solely driven by demand.
Dutton's reality check
Although he has not stated it, Peter Dutton's proposal to reduce migration to 140,000 annually only applies to permanent migration, which is now at 210,000. It is likely that he plans to leave working vacationers and students uncapped.
There must be a cap on international students because the government's goal of 235,000 net overseas migration year, including both temporary and permanent, is actually exactly half of the 469,140 net arrivals in 2023–2024.
Each institution can raise its cap by adding more beds because that goal is somewhat dependent on the ability of the country's construction sector to provide housing.
About 100,000 roofs would be needed to shelter 235,000 migrants, with 2.4 persons each house. Divide that by 2.4 as well. The total number of homes required for that rate of population growth would be almost 130,000. The natural increase is roughly 70,000, which is the number of people turning 25 less the number of deaths this year.
0 Comments