Poll Risks Aside, Migration Boosts Housing Demand Down Under

Australia’s property market is closely watching the impact of shifting migration patterns, with a general election looming. While the current slowdown in net overseas migration (NOM) is expected to continue, its long-term effects on housing demand and supply remain a key consideration for property professionals.

Net Overseas Migration: A Tapering Trend

Forecasts for cumulative net overseas migration are largely consistent with projections from six months ago; however, there’s been some recalibration of the timing. While 2025 is expected to be slightly stronger, the medium-term outlook has been revised downwards. Factoring in demographic data from the September quarter, analysts anticipate a faster reduction in NOM than initially projected in the 2025-26 Federal Budget.

Specifically, NOM is forecast to decrease to 270,000 in FY2025 and then further to a low of 210,000 in FY2027. A return to a steadier level of 250,000 per annum isn’t anticipated until FY2029. This tapering is evident across most major visa categories, but international student numbers are the most significant driver of the decline.

International Student Numbers: A Return to Normal?

Grant approvals for international students fell by 32% year-on-year in the first two months of 2025. However, it’s important to note that this represents a normalisation from a record high base. The international student market remains robust fundamentally, despite challenges. Factors contributing to this normalisation include policy changes implemented in 2024, such as increases to tuition fees and stricter English language testing requirements. These changes are impacting demand and student visa application success rates.

While a proposed cap on student numbers failed to pass parliament, Ministerial Direction 111 was introduced in December as an alternative. This direction prioritises visa applications based on provider-level caps, with an overall target of 270,000 new student commencements annually. This mechanism indirectly achieves a similar controlling effect on student arrivals.

Departure Dynamics and Visa Rollovers

The revised NOM outlook also reflects an anticipated increase in departures. A significant number of temporary visas are nearing expiration, and stay rights have been curtailed in certain areas. Current forecasts assume a considerable degree of “stickiness” among long-term temporary migrants already in Australia. However, if the visa rollover environment proves more restrictive than expected, there is a risk of a more substantial decrease in migration numbers. This, in turn, could impact rental vacancy rates and demand for entry-level housing.

Economic Factors and the Upcoming Election

Recent tariff instability is unlikely to have a significant impact on migration, as the weaker Australian dollar should mitigate any uncertainty for potential migrants. The outcome of the upcoming federal election, however, presents a more substantial risk. A change in government could lead to further policy changes impacting immigration, potentially influencing NOM and, consequently, the property market.

Some analysts believe that a change in government might lead to tighter immigration policies, motivated by concerns about infrastructure strain and housing affordability in major cities. Others argue that any significant reduction in migration could negatively impact economic growth, potentially leading to more cautious approaches. The debate surrounding the optimal level of migration for Australia remains a complex and contested one.

The Reserve Bank of Australia (RBA) is also closely monitoring migration trends, as they directly influence population growth and, consequently, demand for housing and infrastructure. Any significant deviation from current migration projections could impact the RBA’s monetary policy decisions. The normalisation of NOM is set to continue through 2025, and its effects on the Australian property market will be closely scrutinised by investors, developers, and policymakers alike.

Source: Industry research and analysis.

This article is based on a report from www.oxfordeconomics.com titled “Australia Faces Election risk, but migration stabilisation on track”. You can find the original article here: https://www.oxfordeconomics.com/resource/australia-faces-election-risk-but-migration-stabilisation-on-track/