The migration mirage – Our housing crisis isn’t foreign-made — it’s home-grown

It’s not that people love or hate migration - it’s that most don’t understand what’s really driving our housing crunch. 

They’ve been told that “mass migration” is the villain, when in fact the problem is deeper: we’ve built a system that needs population growth to function, but refuses to make room for it properly.

The snapback, not a surge

Australia’s net overseas migration hit 556,000 at the 2023 peak.

It has since dropped back to around 316,000 in 2025 - roughly in line with long-term patterns when you smooth out the Covid chaos.

This isn’t a “big-Australia conspiracy.” It’s a snapback.

Most of the recent growth has simply replaced the students, workers, and families who left during the border closures.

Even now, total population growth sits at about 423,000 per year, with three-quarters from overseas migration. Half of that - about 160,000 people - are overseas students.

So before we reach for the pitchforks, let’s remember: without them, many of our universities, hospitals, restaurants, and regional towns would grind to a halt.

Rents - the real pressure point

Rents have been rising, yes - but the annual increase has halved from 7.6% in 2023 to around 3.8% in 2025.

Over the past two decades, the long-term average rent rise has been just 3.2% per annum.

Migration adds to demand, but it’s not the full story.

The real squeeze came when Covid gutted rental supply. Investors sold up. Airbnbs took over. New builds stalled.

When borders reopened, hundreds of thousands of students and workers were forced to compete for a smaller pool of homes.

Migration and rental vacancies

Overlay the data and it’s clear: rents move in line with migration spikes - but only when vacancy rates are already tight.

Australia’s rental vacancy rate has fallen from an average of 2.3% to 1.4% today.

During Covid, it dipped to just 1.1%. In that kind of market, even modest inflows of new residents send prices rocketing.

The takeaway isn’t to shut the gates. It’s to open the pipes - to build and repurpose housing faster, smarter, and smaller.

Prices follow people (and rates)

House prices follow population trends, but with a lag - usually about 18 months.

The 2023-24 migration rebound lifted prices again, but interest rate movements remain the dominant short-term driver.

Australia’s median house price is up 5.1% over the past year, close to the long-term annual average of 5.7%.

Prices surged 21.6% in 2021 - not because of migrants, but because of record-low interest rates and government stimulus.

Rates, reality, and the RBA

The target cash rate has climbed from 0.1% in 2022 to around 4.25% in late 2025, the sharpest rise since the 1980s.

Whenever rates rise (red dots in Chart 8), house price growth slows or reverses. When they fall (blue dots), the market rebounds.

So while migration might set the stage, it’s monetary policy that writes the plot.

Why we still need overseas population growth

Australia’s circa 2% GDP growth forecast over the next few years depends heavily on population growth contributing 1.3 percentage points.

Without it, our economy would flatline.

That’s the awkward truth politicians rarely say out loud: our prosperity model relies on more bums on seats.

More workers, more students, more taxpayers. But every time we welcome them, we act surprised that they also need somewhere to live.

The real fix: smarter supply

Australia could absolutely handle up to 500,000 new residents a year - if we built the right housing in the right places.

Instead, we tie ourselves in knots.

We argue about “mass migration” instead of fixing the planning, infrastructure, and design bottlenecks that make new housing so expensive and slow.

We could:

• Mine every lot — new or existing allotments — within 30 minutes’ walk (roughly 3 km) of a rail station, heavy or light, for at least two dwellings.
• Fast-track modular, small-scale infill — BYH, townhouses, dual occupancies, and flex homes.
• Use current technology to reduce civic load — things like onsite grey and black water treatment, EV-ready networks, and micro-energy grids.
• Incentivise redevelopment of under-utilised urban land instead of pushing people to the fringe.

That’s how we add capacity without needing to fund and build more infrastructure.

It’s not mass migration - it’s missed opportunity

Most Australians aren’t anti-growth; they’re just tired of poor planning.

The frustration is real, but the blame is misplaced.

Migration didn’t create the shortage - our policy paralysis did.

We don’t lack land. We lack permission. We don’t lack builders. We lack certainty. And we don’t lack innovation - we just won’t use it.

If we really want to make new housing affordable - for locals and newcomers alike - we need to shift the debate from “how many people?” to “how well do we house them?”

Because right now, the problem isn’t that too many are coming.

It’s that we’re still building as if no one ever did or would.

About Michael Matusik Michael is director of independent property advisory Matusik Property Insights. He is independent, perceptive and to the point; has helped over 550 new residential developments come to fruition and writes his insightful Matusik Missive