Is The Drop In Migration Numbers The Break The Housing Market Needed?

At the end of last year, the headlines screamed of falling migration numbers, but don’t be fooled—this is no breather for Australia’s housing market.

If anything, it’s just a reminder of the storm brewing beneath the surface.

For the first time since our borders reopened in late 2021, Australia’s annual net overseas migration has fallen with the Australian Bureau of Statistics revealing that net migration added 446,000 people to our population in the 2023-24 financial year.

This was a 16% drop from the record-breaking 536,000 migrants we welcomed in 2022-23, but in reality, we added the equivalent of another Canberra worth of migrants, overshooting Anthony Albanese’s promised target by a Port Macquarie.

Why did migration numbers fall?

There are a couple of key reasons for the drop.

First, migrant arrivals fell by 10%, particularly among temporary visa holders - think international students and working holidaymakers.

Second, departures rose by 8%, which means more people are leaving Australia than they have in recent years.

But as I said, even with this decline, the 446,000 net migrants far exceeded the federal government’s migration target of 395,000 for 2023-24.

So, while the fall is noticeable, we’re still seeing exceptionally high migration levels.

And who are these migrants?

The largest group by far is international students, with 207,000 arriving in the past year, with India, China, and the UK continuing to dominate as the top source countries.

Notably, the median age of these arrivals is 27—a demographic that’s likely to rent before they buy, meaning ongoing demand in the rental market.

What does this mean for housing?

So what does this dip in migration mean for our already strained housing market?

While fewer arrivals might ease demand slightly in the short term, especially for rentals, the broader picture remains unchanged -  we’re still facing a chronic housing supply shortage.

Migration levels, even at these reduced figures, are adding tens of thousands of new residents to our major cities each month.

This influx continues to push up demand for rentals, which are already in critically short supply.

Vacancy rates remain at historic lows, and even though rental growth slowed at the end of last year, rents will keep rising because of the supply/demand imbalance.

And let’s not forget, migrants don’t just rent.

Most aspire to homeownership after a few years, which will add even more pressure to our limited housing stock in the next few years.

Of course, the good news for property investors is that this dynamic underscores a crucial point—demand isn’t going anywhere.

Don’t forget migrants gravitate toward our major cities – in particular Sydney, Melbourne and Brisbane, where the majority of jobs are.

And with new housing construction slowing, competition for quality properties will only intensify.

That means well-located investment properties in high-demand areas will continue to deliver solid capital growth and rental returns.

About Brett Warren Brett Warren is National Director of Metropole Properties and uses his two decades of property investment experience to advise clients how to grow, protect and pass on their wealth through strategic property advice.