By Cassandra Mascarenhas, Product & Marketing Strategist, MakeSpace - a housing advisory and project delivery for community, affordable and specialised housing providers

Published on September 13, 2026

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KPMG modelling commissioned by Guardian Australia found that cutting net overseas migration to zero over a decade would make Australian house prices 2.3% higher by 2035, not lower, because the loss of construction workers reduces housing supply by more than it reduces demand. At the same time, net overseas migration has been falling since its 2022–23 peak and is now approaching pre-pandemic levels, while structural factors including declining household size and construction workforce shortages are driving housing demand and limiting supply, unrelated to migration.

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Would cutting migration reduce house prices in Australia?

The evidence suggests it would not, and modelling suggests it, in fact, could make prices higher. KPMG chief economist Brendan Rynne modelled a zero net migration scenario for Guardian Australia (September 2025) and found house prices would be 2.3% higher by 2035 than under continued migration, because the construction workforce shrinks faster than housing demand falls.

The modelling found that under zero net migration over ten years:

• Australia's population would reach 29 million by 2035, compared with 31.2 million under continued migration
• Wages would be 7.5% higher and unemployment 0.2 percentage points lower, a tighter labour market
• House prices would still be higher, because reduced construction labour shrinks supply by more than reduced arrivals shrink demand
• The federal budget deficit would widen to $87 billion by the mid-2030s instead of approaching balance, with total debt $437 billion higher over the decade than under continued migration

KPMG chief economist Brendan Rynne modelled a zero net migration scenario for Guardian Australia (September 2025). The finding: house prices would be 2.3% higher by 2035 than under continued migration. Reduced construction labour shrinks supply by more than reduced arrivals shrink demand. The Australian economy would be 2.4% smaller, and the federal budget deficit would widen to $87 billion by the mid-2030s.

Migration both increases demand for housing and provides the labour needed to build it. The RBA's own analysis notes that population growth increases both housing demand and the labour supply that enables construction; it is not a simple demand-side variable. When arrivals fall sharply, both sides of that equation are affected simultaneously.

This does not mean migration levels have no bearing on housing pressure. Rapid increases in arrivals during a period when construction is stalled do create system pressure. The point is that migration reduction alone is not a reliable mechanism for reducing house prices, and the relationship is considerably more complex than public debate typically acknowledges.

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Where does net overseas migration stand right now?

Net overseas migration peaked at 538,000 in 2022–23 (the highest annual figure in Australia's history) and has fallen in each subsequent year, reaching 306,000 in 2024–25, approaching pre-pandemic levels, according to the Australian Bureau of Statistics.

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The post-pandemic peak reflected a rebound from near-zero migration during the lockdown years, not a permanent change in policy direction. When borders closed, many temporary residents returned home. When borders reopened, a rapid recovery followed. The difficulty for housing markets was the speed of that rebound in a period when construction capacity was already under pressure.

The government has since tightened several settings: the permanent migration program was trimmed to 185,000 places in 2024–25; student visa fees and financial thresholds were raised; work hour restrictions were reinstated and tightened; and a cap of 270,000 student commencements was introduced in 2024, subsequently raised to 295,000 following pushback from universities. As of 2025, approximately 31% of Australia's resident population was born overseas, the highest share on record.

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What else is driving housing demand?

The structural shift toward smaller households has a larger impact on total housing demand than changes in migration volumes, because it increases the number of dwellings needed by the existing population independently of any new arrivals.

Average household size in Australia fell to 2.48 in June 2025, the lowest on record. Over a quarter of all Australian households (27.5%) are now single-person households, the highest share ever recorded. AHURI research has found this structural shift has a larger impact on total housing demand than changes in migration volumes. — ABS/Deloitte, October 2025; AHURI

At 2.48 people per household, Australia requires more dwellings for the same population than it did a generation ago. This matters for housing policy because it means demand for new dwellings would continue to grow even at zero population growth, as household formation continues to outpace the total number of people. Changes in how Australians live, such as remote working, later partnering, longer independent life in older age, are structural and not temporary. They will not reverse as pandemic conditions normalise.

Internal migration adds further complexity. AHURI Final Report 438 found that the flow of Australians out of capital cities to regional areas has exceeded the reverse movement in almost every year since 2007 (2013 being the only exception). This is a long-run structural trend that accelerated during the pandemic, with significant consequences for regional housing markets covered in the next section.

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How did population movement reshape regional housing markets?

Between mid-2020 and April 2022, regional house prices rose 41.6%, nearly double the 25.5% increase in capital cities over the same period, driven primarily by internal migration from cities to regional areas, not by overseas arrivals.

The mechanism AHURI identified is a ripple effect: when people move to a region, prices rise locally and in surrounding areas. As costs increase, lower-income residents are priced out and move further away, triggering successive waves of price increases in more distant destinations. Victoria became a contributor to house price changes in every other Australian state and territory as residents migrated out, demonstrating how localised population movement can have national consequences for housing affordability.

The people most affected are those with the least capacity to absorb rapid cost changes. Regional areas typically have higher concentrations of low-income and tenant households, where sudden price increases translate directly into severe housing stress and displacement.

AHURI's policy recommendations in response to this evidence include extending regional employee incentive schemes, investing in regional infrastructure, providing financial support for low-income renters in affected areas, and increasing social and emergency housing investment in regional markets; responses that address the structural drivers rather than the population movements themselves.

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What is constraining housing supply, and where does migration fit in?

Australia's housing construction faces structural capacity constraints that predate the post-pandemic period. A 12% decline in labour productivity over 30 years, approval processes that have extended average build times from 6.4 months a decade ago to 10.4 months today, and construction costs that remain approximately 45% above pre-pandemic levels are the primary barriers to new supply, not the number of people arriving in Australia. A 300,000-worker construction shortage is projected by 2027.

Deloitte's January 2025 analysis adds important context: dwelling investment is at a record low as a share of the economy; over the past 30 years, labour productivity in dwelling construction has declined 12% while productivity across the broader economy rose 49%; and the average time to complete a home has grown from 6.4 months to 10.4 months.

Migration is part of the response to these constraints, not only a source of demand:

• BuildSkills Australia estimates an additional 90,000 construction workers are needed to meet the National Housing Accord target of 1.2 million homes
• The 2026 Federal Budget committed $85.2 million to accelerate skills assessments for skilled migrants in trades industries, explicitly treating overseas labour as part of the supply response
• When pandemic-era border closures caused an exodus of overseas workers from the construction sector, supply shocks followed; the lesson was clear

The NHSAC State of the Housing System 2025 projects 938,000 dwellings during the Housing Accord period against a target of 1.2 million, a 262,000-home shortfall that exists independently of migration policy choices.

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For more on how responsibility for housing affordability is distributed across levels of government, our blog on who is responsible for housing affordability in Australia covers this in detail.

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How MakeSpace sees its role in this picture

MakeSpace does not take a position on migration policy: that is a broader political and societal question with consequences well beyond housing.

What MakeSpace is interested in the supply side economics regarding migration. Australia's primary housing challenge is a supply problem: too few homes being built, too slowly, at costs that make many projects unviable. The NHSAC's 938,000 versus 1.2 million Accord gap exists regardless of migration policy choices. Closing it requires feasibility discipline, project governance, and organisations that can navigate a difficult construction environment.

For community housing providers, not-for-profit housing organisations, and purpose-driven developers, the question is less about migration levels and more about whether the housing system can be built out at the scale and speed needed, and whether their specific projects can proceed despite workforce shortages, cost pressures, and feasibility constraints that AHURI consistently identifies as the core bottlenecks.

MakeSpace works with providers on feasibility, procurement strategy, and project governance across social housing, community housing, affordable housing, and specialised residential accommodation.

If your organisation is working on the supply side of this challenge: planning, building, or funding more social and affordable housing, do get in touch.

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Frequently Asked Questions (FAQs)

Would cutting migration reduce house prices in Australia?

Not necessarily. KPMG modelling for Guardian Australia found that zero net migration over ten years would result in house prices 2.3% higher by 2035 than under continued migration. Fewer construction workers reduces housing supply by more than fewer arrivals reduces demand. A tighter labour market would push wages higher and fuel inflation, eroding real income gains. Effective relief from housing pressure requires faster planning approvals, more build-ready land, investment in construction workforce capacity, and stable conditions that support multi-year development programs.

Has net overseas migration (NOM) in Australia been falling recently?

Yes. After peaking at 538,000 in 2022–23 (the highest annual figure in Australian history) NOM declined to 446,000 in 2023–24 and then to 306,000 in 2024–25, per the ABS. Federal Budget projections forecast continued falls to around 225,000 per year by 2027–28. The post-pandemic peak reflected a rebound from near-zero migration during the lockdown years rather than a permanent change in policy direction. The tightening of student visa settings, permanent program caps, and new work rules has accelerated the downward trend since 2023.

What drove regional house price increases during the pandemic?

Internal migration, that is, movement from capital cities to regional areas, was the primary driver, not overseas arrivals. AHURI Final Report 438 (March 2025) found regional house prices rose 41.6% between mid-2020 and April 2022, nearly double the 25.5% increase in capital cities over the same period. A ripple effect followed, with rising costs in one area pushing lower-income residents further out and triggering successive waves of price increases in more distant locations. The underlying trend of Australians leaving cities for regional areas has been in place since 2007. The pandemic accelerated it, but did not create it.

Can migration help address Australia's housing shortage?

Yes, by contributing to the construction workforce. BuildSkills Australia estimates 90,000 additional workers are needed to meet the Housing Accord target of 1.2 million homes. The 2026 Federal Budget committed $85.2 million to accelerate skills assessments for migrants in trades, treating overseas labour as part of the supply response. AHURI research consistently identifies construction capacity, not population growth, as the primary constraint on housing supply. Structural reforms to planning approvals, construction processes, and workforce training are also needed alongside appropriate migration settings to improve housing supply outcomes.

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Sources: Guardian Australia / KPMG — Brendan Rynne modelling, September 2025; ABS — Annual net overseas migration falls second year in a row, December 2025; The Conversation — Australia's migration system lacks something crucial: a plan, July 2026; AHURI Final Report 438 — Inquiry into projecting Australia's urban and regional futures, March 2025; AHURI Final Report 461 — Overcoming construction constraints, June 2026; Deloitte — Housing demand is hot, supply is not, October 2025; Deloitte — New year, same challenges for Australia's housing market, January 2025; NHSAC — State of the Housing System 2025; AHURI — Federal measures to tackle Australia's housing challenges; Cotality — Population vs construction: the gap driving Australia's housing divide, April 2026

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Last updated on September 13, 2026

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