The sharp drop in migrants, particularly international students, is forecast by the corporation to have a major ripple effect across the property market, particularly for units in Sydney and Melbourne.
Nationally, new supply is expected to out-pace demand by 127,000 dwellings in 2021 and by 68,000 dwellings in 2022.
In Melbourne, the corporation estimates there will be an oversupply of 75,500 dwellings between this year and 2022 before demand starts to catch up with supply. By 2025, demand is expected to be 10,200 short of supply.
Across the rest of Victoria, supply is expected to exceed demand by 8400 through to 2023.
In Sydney, the corporation believes there will be a 70,500-dwelling oversupply by the end of 2022 before the market starts to correct. Outside the capital, regional NSW is forecast to face an over-supply of 20,100 dwellings by the end of 2022.
Every other state and territory capital city is expected to suffer some degree of over-supply with the worst affected forecast to be Canberra with a demand shortfall to the end of 2023.
The corporation found the unfilled dwellings would make housing, particularly for renters, more affordable.
“Supply and demand projections suggest rental affordability will improve out to 2022, particularly in more densely populated eastern seaboard cities, as there are fewer households forming to soak up new supply,” it found.
“In inner-city areas of Sydney and Melbourne, a blend of back-logged rental listings, reduced demand and the economic downturn will most likely result in downward pressure on rents.”
But it cautioned this affordability would be offset to some degree by pressure on job levels and wages growth in industries more directly affected by the pandemic.
Once the international border is back open, pressures on rents would return while there would also be pressure on house prices, leaving some capitals such as Sydney unaffordable for people on low incomes.
“Longer term trends of declining affordability, particularly for low-income households in the private rental market and the ability for prospective first-home buyers to transition to home ownership are likely to persist, particularly if supply is not responsive to demand when it recovers,” it found.
The corporation also noted the drop in migration, coupled with changing demographic trends, would lead to substantial differences in the make-up of Australian households.
It is expected the number of lone households with residents aged 70 or older to grow by 23 per cent between 2019 and 2025. Couples without children are expected to grow in number by 9 per cent and single parent households are predicted to grow by 4 per cent.
Traditional couples with children households are expected to grow by 3 per cent, accounting for less than 48 per cent of all households.
Shane is a senior economics correspondent for The Age and The Sydney Morning Herald.