Net overseas migration to drive huge drop in new dwelling demand: NHFIC

The COVID-19 pandemic could cut demand for new housing in Australia by between 129,000 and 232,000 dwellings over the next three years, according to new research by the National Housing Finance and Investment Corporation (NHFIC).

The NHFIC say that the population growth scenarios have significant consequences for underlying housing demand, or the demand for new housing.

NHFIC chief executive Nathan Dal Bon said, “This research highlights the strong relationship between population growth, increasingly through net overseas migration, and underlying dwelling demand with the outlook for population growth due to COVID-19 highly uncertain.” 

The NHFIC have put forward three scenarios with varying population growth forecasts.

Scenario one would see a relatively shallow downturn, which would see student visas return to pre-pandemic levels by 2027 and population growth seeing some recovery towards pre-COVID-19 levels by 2022.

That would see a 129,000 reduction in demand for dwellings compared to pre-pandemic projections.

Scenario two would see a 232,000 reduction in underlying demand compared to pre-pandemic projections.

That would happen if there's a deeper and more prolonged downturn, but with a similar pace of recovery. 

The NHFIC say the downturn is consistent with COVID-19 infections continuing to rise globally, which will delay border openings and the economic recovery.

The third scenario uses the population projections produced by the Australian Government’s Centre for Population, consistent with the forecasts the Commonwealth Government used in its most recent budget update.

That would see a 150,000 reduction in underlying demand.

Property advisory consultancy Macroplan forecasted the underlying demand for housing for each scenario.

The state, capital city and regional population levels and age distribution are estimated for each year of the projection period, based on ABS estimates of the birth rate, mortality rate, and male and female life expectancy.

Population age is the key driver of living arrangements for individuals, with flow-on effects to housing demand.

The propensity to live in either a family or non-family household, or a non-private dwelling, is then estimated at state, capital city and regional levels. Non-private dwellings are removed from the estimate from this step forward.

The number of households by type are estimated. This includes estimates for family households, including couples with children, couples without children, sole parents and other family households. The number of group households and lone person households are also estimated.