The hit to Australia’s population growth from closing its international borders is quickly turning a long-running housing shortage into a glut, bringing an end to the apartment building boom behind much of the country’s recent prosperity.
Since 2000, Australia has added about 6 million to its population, more than six times the growth seen in Germany, with most of that coming from immigration.
That fuelled huge demand for housing construction, much of it smaller dwellings in larger, higher-density urban blocks, not just the bungalows on sprawling plots for which Australian suburbs are better known.
With Australia’s borders likely to remain closed until the coronavirus pandemic is successfully contained, a heavy decline in construction, which accounts for roughly 10% of all jobs and economic activity, is set to push unemployment higher and hurt businesses both up and downstream.
Lindsay Partridge, managing director of Brickworks, a building materials company, sees the pipeline for big multi-unit housing developments drying up as immigration stalls and non-permanent residents depart.
“We are seeing quite high vacancy rates emerging,” Partridge told Reuters. “A lot of the people who were renting apartments are going home.”
Sydney, the biggest city, is experiencing the worst residential vacancy rate in the country at over 16% in May from between 4% and 5% late last year, according to SQM research.
Since 2014, higher density housing has accounted for about 43% of residential construction, more than double the proportion during the 1980s. Significant demand has come from the massive influx of foreign students who make up about 40% of Australia’s immigration intake.
In May, the number of higher density homes approved for construction fell 34.9% to a near eight-year low, data showed last week. Economists see further declines ahead.
BIS Oxford expects construction starts for high rise apartments to fall to just 21,500 in the year to June 2021, down by two-thirds from five years ago.
To head off the expected shock, the central bank has slashed borrowing rates to record lows. State and federal governments have brought forward massive public works spending and offered grants for home alterations.
There are also hopes that demand for houses in areas outside the major cities might pick up as employers increasingly embrace remote working arrangements.