house prices

How the COVID-19 pandemic will cause Australia’s population to plunge – sparking fears of a 40 per cent collapse in house prices

PHOTO: After the GFC, between 2012 and 2017, house prices in Australia’s two biggest cities surged with Sydney values rising by 68 per cent as Melbourne’s median price climbed by 54 per cent, official data showed. Pictured is a Carlton North terrace in Melbourne on the market

The coronavirus pandemic is expected to cause Australia’s steepest population plunge since World War I – amid fears of a 40 per cent house price plummet.

The federal government’s National Housing Finance and Investment Corporation is forecasting a 0.8 per cent population decline over two years.

In the absence of immigration, Australia’s population was expected to fall by 214,000 between a peak in 2019 and a trough in 2021, as a recession devastated the housing market.

Half of that was attributed to the drop-off in international students, following the closure of Australia’s national border in March.

‘Immigration cuts have flow-on effects on population growth – temporary (international students) immigrants are the main driver of population growth,’ the NHFIC report said.

Australia’s population growth over the years

Australia’s population growth

1881: 2.3 million

1918: 5 million

1959: 10 million

1981: 15 million

1991: 17.4 million

2004: 20 million

2013: 23 million

2016: 24 million

2018: 25 million

Sources: Australian Bureau of Statistics; Australian Parliament House

In July, the number of international students plunged by 100 per cent, or 143,810, compared with the same month in 2019, Australian Bureau of Statistics data showed.

This caused rental vacancy rates to surge in inner-city areas of Sydney, Melbourne and Brisbane where landlords had been particularly reliant on international students.

‘Large falls in underlying dwelling demand, particularly due to substantial falls in international students, are already putting upward pressure on vacancy rates and downward pressure on rents in inner-city suburbs,’ the NHFIC said.

‘If sustained, this could cause a contraction in construction activity that will add to the recessionary forces that are impacting the economy.’

Australia’s immigration pause would spark the steepest population decrease since World War I, shortly before the Spanish flu pandemic in January 1919 reached Australian shores.

Only the unwinding of the long, post-war baby boom in 1971 saw a comparably steep population decline.