Earlier this month, the NSW Productivity Commission (PC) released a White Paper explicitly stating that Sydney’s housing shortage was caused by an unexpected boom in Sydney’s population when the federal government threw open the immigration floodgates in 2005:
Much evidence suggests that our State, and Sydney in particular, has not delivered enough housing over many years.
Of many possible contributing factors, two stand out. First, population growth has exceeded expectations. Forecasts made in 2005 predicted that Sydney’s population would reach 5.2 million by 2031. More recent projections are for a population of around 6.2 million by this time (NSW Department of Planning, Industry and Environment, 2019).
Second, housing supply policy has not achieved the desired results… Since 2006, NSW housing supply has not kept pace with demand or State targets. That has created an accumulated underlying shortage of dwellings.
Yesterday’s NSW Budget revealed that the state’s housing shortage has all but evaporated thanks to the collapse in immigration:
Residential construction is expected to remain strong in the very near term, fuelled by higher house prices, ongoing policy support and low interest rates…
Building approvals are now running well ahead of the change in population, which is depressed due to the lack of inward migration. This suggests a potential oversupply in the near-term relative to the underlying demand for housing (Chart 2.13).
The NSW Intergenerational Report, released earlier this month, noted that “net overseas migration is expected to return to positive levels in 2023, before returning to pre-COVID-19 levels towards the end of this decade”. Accordingly, “net migration is projected to contribute 2.0 million people to the NSW population” over the projection period to 2061, which “will need 1.7 million additional homes for a growing population, equivalent to one new home for every two existing homes”.
Let’s get real here. Sydney’s housing shortage could be permanently solved with the stroke of a pen by the federal government. All it needs to do is reduce immigration back to historical pre-2005 levels. This would also negate the need to bulldoze Sydney’s suburbs into high density.
Without immigration, Sydney’s population wouldn’t even grow (see above chart). Thus, immigration is the sole driver of Sydney’s housing shortages.