Slashing Migration Could Drive Higher Australian House Prices

Slashing migration is being sold as a quick way to cool house prices, but current data and industry forecasts point in the opposite direction: cutting migrant arrivals in 2025 is unlikely to make homes cheaper and may push prices higher over time. Analysts at KPMG project national dwelling values to rise by about 5.3% over the next six months and by 5.6% across 2025, while CoreLogic’s latest read shows a 6.55% year‑on‑year lift in median dwelling values as of February 2025, taking the national median to AUD 815,912. These increases are unfolding even as the federal government tightens visa settings.

The core pressure, experts say, is a long‑running undersupply of housing, not migration alone. When the pipeline for new homes thins, price growth often accelerates once demand reasserts itself—whether from local household formation, returning migrants, or lower interest rates.

What’s changed in migration policy

Tighter migration policy is already in effect:

• The permanent migration program for 2024–25 was trimmed to 185,000 places, down from 190,000, with a stronger tilt to employer‑sponsored and regional visas.
• From 2025–26, the government has flagged a skilled migration quota of about 142,400, alongside a shift from the Temporary Skill Shortage framework to the new Skills in Demand visa model.
• Student visa fees and financial thresholds have risen, and tighter work rules are in place.

These changes aim to address workforce needs and slow short‑term arrivals. But cutting inflows does not fix the shortage of homes already years in the making. Developers, banks, builders, and councils respond to forward demand signals. When those signals dim, construction slows, sites pause, and the supply gap widens.

Rental market dynamics and latent demand

The rental market shows the same imbalance. Even with slower migrant entries through late 2024 and early 2025, rent burdens remain near record levels.

• CoreLogic estimates renters are paying about 33% of pre‑tax income on rent—the highest share since 2006.
• High rents push people to share homes or delay moving out, lifting average household size. That temporarily lowers the number of dwellings needed at any one time.
• But this creates latent demand: once conditions ease—through wage growth, cheaper credit, or improved confidence—doubled‑up households look for their own place. If the construction pipeline has thinned, prices and rents can jump faster when that demand is released.

High rents and increased household size can mask a deeper housing shortfall that will reappear quickly once economic conditions improve.

Supply-side issues are the main driver

Industry groups and analysts repeatedly point to supply as the primary driver of price growth across Australia’s capitals and key regions. Key supply constraints include:

• Tight stock and slow planning approvals (especially in Brisbane, Adelaide, Perth)
• Building cost pressures and materials delays
• Financing costs and cautious lenders
• Builder insolvencies following the pandemic-era boom
• Labour shortages in trades and construction

Cutting migration does little to resolve these bottlenecks. In fact, fewer skilled arrivals in construction and trades can make it harder to lift supply quickly—particularly in regional areas already struggling to fill roles.

Why migration isn’t a simple dial on prices

According to analysis by VisaVerge.com, the policy conversation often treats migration as a dial that can control house prices on its own. But the housing system is more complex:

• Prices respond to the balance of finished homes and buyers ready to act, and to the pace at which new stock enters the market.
• When approvals and commencements stall, the next upswing arrives with fewer dwellings available.
• That is why prices can keep rising even as migration steps down: the base supply remains too low and the forward pipeline too thin to change that reality within one or two years.

Household formation and cyclical effects

Household formation is a powerful, independent driver of housing demand:

• Migration raises population and household numbers.
• Household formation also grows when young adults move out, couples separate, or older residents live alone.
• During the pandemic, smaller household sizes boosted demand for extra dwellings, pushing rents and prices up.
• When migration is slashed, larger households can reduce immediate demand, developers see weaker pre‑sales, and projects are postponed.
• If the cycle later turns—driven by lower rates or improving confidence—paused households re‑enter the market quickly, and supply is not ready, causing sharper price growth instead of sustained relief.

Policy design: employer‑sponsored and regional visas

The shift toward employer‑sponsored and regional visas is designed to target skills gaps and support communities outside major capitals. On paper, this could:

• Spread demand more evenly
• Help provide labour where it is needed for construction and services

But the near‑term effect of a smaller permanent intake and tighter temporary pathways is to lower the demand signal that underpins multi‑year housing investment. That matters for lenders and developers who need certainty before funding large projects. If the permanent program stays below the housing construction targets set by national and state plans, the risk is fewer cranes in the sky and a deeper supply shortfall later in the decade.

Forecasts and timing risks

Price forecasts take timing effects seriously:

• KPMG expects dwelling values to rise through 2025.
• Many market economists see rate cuts by the Reserve Bank in late 2025 as another demand driver.

If borrowing costs fall, buyer numbers usually lift—especially among first‑home buyers. In a normal market, new supply might meet that wave. But with building approvals soft and builders facing higher input costs, developers are cautious. Slashing migration now, then easing policy later, risks a stop‑start pattern that magnifies the cycle: slow construction during the lull, then a scramble for too few dwellings when demand returns.

Effects on renters and first‑time buyers

Affordability pressures are not limited to buyers:

• Renters (including many international students and new graduates) are staying longer in share houses or with family, keeping vacancies low.
• This reduces the count of separate tenancies but does not add physical homes.
• When those renters eventually seek their own place, the rental market can tighten quickly.

Homebuyers face a similar reality: if interest rates ease in late 2025, borrowing capacity will improve and competition will rise. With prices already trending up (5–6% in many forecasts), lower migration will not offset demand drivers if listings remain scarce and new builds lag.

City and property‑type variation

Market conditions vary by location and property type:

• In parts of Sydney and Melbourne, apartments are attracting renewed interest because of price gaps with houses and demand for medium‑density options near jobs and transport.
• In Perth and Adelaide, thin listings and strong local economies have pushed prices higher with limited new stock.
• Regional centres linked to resources or logistics also face tight supply.

Across all these markets, lowering migration without unlocking more build‑ready land, faster approvals, and reliable builder capacity risks worsening the problem it aims to solve.

Government measures and industry hurdles

The government has paired migration changes with housing goals, including:

• Faster planning
• Support for build‑to‑rent
• Targets for new homes

These steps can help if they translate into more approved sites, shorter lead times, and better delivery. But the industry highlights persistent hurdles:

• High construction costs
• Slow materials delivery
• Wariness from firms after insolvencies
• Shortage of skilled labour

Without a strong, steady signal that future demand will exist—through stable population planning and consistent migration settings—developers scale back and a short‑term slowdown becomes a medium‑term shortage.

Financial constraints and developer behaviour

Financial settings add another layer of constraint:

• Banks weigh pre‑sales, costs, and price forecasts before funding projects.
• If migration policy reduces near‑term buyer pools, viable projects can fall below funding thresholds and be shelved.
• Supply responds to demand expectations, not just today’s vacancy rate.
• Policies that appear to ease demand at the margin can quietly shrink the next wave of supply, leaving the market tighter later.

Counterarguments and long‑term levers

Critics of higher migration argue that fewer arrivals would reduce competition for rentals and first‑home buyer stock in some suburbs. That may be true in the very short term for specific areas. But:

• The effect often fades as household sizes adjust and local demand continues to grow.
• Australia’s population still expands through natural increase and internal migration toward jobs and family.
• Lasting change to price growth comes from releasing more land and approvals, scaling up medium‑density infill, and improving infrastructure—tasks that are slow and complex.

Industry voices, including KPMG and CoreLogic, stress that focusing only on the migration tap while ignoring supply pipes is misguided. Cutting headline migration numbers may ease headlines, but they do not add dwellings, and may discourage the investment needed to lift completions toward national targets.

A simple thought experiment

Suppose intake is cut sharply for two years:

1. Developers scale back because pre‑sales fall and lenders become cautious.
2. Build times stretch as trades leave the sector.
3. The economy improves, the Reserve Bank cuts rates, and migration is lifted again.
4. Buyers and renters re‑enter at once, but the supply pipeline has thinned.

Result: prices rise faster than they would have if construction had continued at a steady pace. Slashing migration does not deliver cheaper homes—it delays supply and magnifies the next upswing.

Skills in Demand visa and timing lag

The Skills in Demand visa shift aims to better map arrivals to shortages, particularly in regions. If implemented well, it could smooth labour supply for construction and infrastructure. But:

• Policy wins take time to show up as completed dwellings.
• Projects announced today might settle new residents two to four years from now.
• That lag is why stable, predictable settings matter; frequent swings in migration numbers and rules create uncertainty that slows decision‑making across the housing industry.

Practical implications for renters and buyers

For renters:
– A reduction in migration alone is unlikely to deliver quick rent relief.
– Average household size can rise temporarily, masking deeper shortages.
– Renters benefit most from steady supply growth: more medium‑density buildings near transport, more townhouses on infill sites, and better incentives for long‑term rental investment.

For buyers:
– If interest rates ease in late 2025, competition will return, and lower migration will not offset those demand drivers if listings remain scarce and new builds lag.
– Buyers will find relief in new supply and better choice, not smaller visa numbers alone.

What states and councils are doing

States and councils are responding with steps such as:

• Speeding approvals
• Encouraging build‑to‑rent projects
• Easing height limits near transport hubs
• Setting housing targets tied to infrastructure funding

These measures can help if they bring more projects to market and are backed by coordination, stable rules, and enough skilled labour.

Looking ahead

Australia’s population is expected to return to near pre‑pandemic growth rates by around 2026, according to multiple forecasts, putting renewed pressure on the housing system. If the country enters that period with a weaker construction pipeline, the strain on prices and rents will increase.

Planning now—through consistent migration settings, support for builders, and clear infrastructure timelines—gives the market a better chance to deliver the homes people need at prices they can afford.

For official guidance on current visa settings and the Skills in Demand framework, see the Department of Home Affairs: https://www.homeaffairs.gov.au. Policy updates there outline program size, visa categories, and employer‑sponsored pathways, including regional options.

The debate over slashing migration and house prices in Australia will continue through 2025. The lesson from recent years is clear: when supply lags, prices rise. When the pipeline shrinks, the next upswing bites harder. Cutting migrant arrivals may lower the visible count of would‑be renters or buyers for a time, but it also lowers the confidence and capacity needed to build enough homes. Unless supply improves, affordability will remain out of reach for many, regardless of the migration headline.