Editor’s Note: This is Part 3 of the APN Insight series, “The Anatomy of a Crisis.” The series was prompted by a viral video from MacroBusiness economist Leith van Onselen, which crystallised the scale of the nation’s housing shortfall. In Part 1, we dissect the foundational numbers. In Part 2, we investigate the structural reasons why we can’t build faster. And in Part 3, we explore the controversial demand-side factors to ask: is it the whole story?
For a full breakdown of the data and sources, you can access the complete consolidated APN Research Report here.
Is Migration Really to Blame for the Housing Crisis? An Alternative View
The narrative surrounding Australia’s housing crisis has become a powerful and deceptively simple one. We are told that a tidal wave of Net Overseas Migration (NOM) is crashing against a breakwater of inadequate housing supply. The logic is intuitive, the numbers are stark, and the conclusion seems inescapable: migration is the primary culprit.
But is it the whole story? Or is focusing on the latest influx of new arrivals a convenient distraction from deeper, more entrenched issues that have been brewing for decades?
While no one can deny the short-term pressure that rapid population growth places on housing, a closer look at the evidence suggests that blaming migration is a profound misdiagnosis. Specifically, the sudden influx of people places intense, undeniable pressure on the rental market. However, this acute rental pressure should not be confused with the deeper, long-term structural forces that have inflated property asset prices for over a generation.
An Alternative Diagnosis: The Demand-Side Drivers
The most compelling evidence against the migration-as-cause theory was the “natural experiment” of the COVID-19 pandemic. For the first time in generations, Australia’s international borders slammed shut.
- Net Overseas Migration turned sharply negative. In the 2020-21 financial year, Australia experienced a net outflow of 88,800 people, the largest net loss since the First World War.
- In stark contrast, Australian house prices experienced one of the most explosive booms in history. From the market trough in September 2020 to the end of March 2022, the national Home Value Index surged by an extraordinary 27.8%.
This fact alone forces a radical rethink. If prices can skyrocket while the population is effectively shrinking, it proves that other factors are far more powerful than the number of new arrivals. So, what are these factors? The real story of Australia’s housing crisis is one of artificially inflated demand, supercharged by decades of deliberate policy choices.
1. Tax Settings: Negative Gearing and the CGT Discount For decades, federal government policy has actively encouraged leveraged investment in residential property. The combination of negative gearing and the 50% Capital Gains Tax (CGT) discount has created a tax-advantaged scenario that fuels speculative investment and turns a family home into a financial instrument, allowing investors to compete directly with would-be owner-occupiers.
2. Credit Availability and Financial Deregulation The second, and arguably more powerful, driver has been the cost and availability of credit. The three decades leading up to 2022 were characterised by a long, structural decline in interest rates, which hit a record low of 0.10% in November 2020. Each rate cut directly increased the maximum borrowing capacity of households, and this cheap money was overwhelmingly funnelled into the property market. The size of a mortgage became determined not by the intrinsic value of a home, but by the maximum amount a bank was willing to lend. As lending capacity exploded, house prices dutifully followed.
Ultimately, blaming new arrivals is a convenient way to avoid a more difficult conversation about the politically sensitive policies; tax concessions and a credit system that have made our housing market what it is. A sustainable solution will not be found in simply adjusting migration intake numbers. It requires the political courage to reform the powerful demand-side drivers that have distorted the market for a generation.
Disclaimer
The information contained in this article is for general informational purposes only and does not constitute financial, investment, or legal advice. The Australian Property Network (APN) is not a licensed financial advisor. The content is based on data from third-party sources and is provided without any warranty as to its accuracy, currency, or completeness. Property values can go down as well as up. Before making any property or investment decisions, you should conduct your own research and consider seeking independent professional advice tailored to your specific circumstances.
