Housing market faces pressure as Sydney grapples with high immigration rates

Sydney’s housing market is under intense scrutiny as new modelling suggests that reducing immigration could significantly impact the city’s soaring property prices and rental rates. A recent analysis by FoundIt reveals the potential for a “near instant” shift in the housing market if immigration levels are curtailed, providing much-needed relief to beleaguered tenants and home buyers.

The FoundIt study, which examined building supply and population growth, indicates that a reduction in new arrivals could reverse the current trajectory of the housing market. Specifically, if the migration intake were reduced by 100,000 people, bringing it closer to pre-COVID averages, Sydney house prices could fall by about 1 per cent, as opposed to the projected 2 per cent increase this year. The impact would be most pronounced in outer city areas with a higher supply of new houses and inner city regions with an oversupply of high-rise apartments.

“Sydney prices are high enough that a few (percentage) points of growth make a huge difference,” said Kent Lardner, FoundIt’s head of research. Lardner, a pioneer in Australian property data, highlighted the significant role immigration has played in driving up prices and rents in recent years. He emphasised that a temporary pause in migration to levels seen in the 2010s could allow building supply to catch up. “The danger if migration stays high is not that Sydney becomes severely unaffordable, it already is, it’s that Sydney’s entry level market may vanish altogether,” Lardner warned.

Pressure on affordability is particularly acute in suburbs like Lakemba, Canley Vale, Canley Heights, Warwick Farm, St Marys, and Auburn. These areas, which still offer some of Sydney’s few remaining properties under $750,000, have experienced strong investor interest due to migration-driven rent increases. FoundIt suggests that a drop in migration would likely reduce investor activity, easing the upward pressure on prices.

The call for a migration “circuit breaker” comes amid criticism of the Albanese government’s immigration policies. The Institute of Public Affairs (IPA) has pointed out that housing supply is failing to keep pace with population growth. According to IPA analysis of 2025 Australian Bureau of Statistics (ABS) data, net permanent and long-term arrivals reached a record-breaking 480,520, surpassing the previous 2023 record by 7 per cent. In contrast, housing approvals fell by 15 per cent annually in December 2025, contributing to a 7 per cent increase in Sydney dwelling prices over the past year.

Dr Kevin You, a senior fellow at the IPA, criticised the government’s National Housing Accord as one of the “greatest policy failures” of the past 25 years. “You do not need to be an economist to know that a flatlining housing supply and a large, migration-induced increase in housing demand results in higher rents (and) more expensive homes,” Dr You stated.

The ABS’s count of net overseas migration, a different metric, was 306,000 over 2024/25, still above pre-COVID levels but down from 429,000 the previous year and a peak of 661,000 in 2022/23.

Real estate professionals have also weighed in on the issue. Peter Li, director of Plus Agency, which markets new developments to foreign buyers, noted that most of these buyers are preparing for a permanent move to Australia. “About 80 per cent of our foreign buyers are preparing to come here,” Li said. “They are not planning to come naked. They are arriving with a lot of capital for buying … not just renting. Cutting migration would have a huge impact. They are the biggest market for newly-built (units).”

Louis Christopher, director of SQM Research, argued that the Labor government had fallen behind its goal to build 1.2 million new homes by 2029. He suggested that migration cuts would be most effective if implemented immediately. “Intake should have been cut years ago,” Christopher noted. He emphasised that reducing migration intake would have a significant impact on rents, particularly in Sydney and Melbourne. “If (migration) dropped, you would see rents fall in Sydney and Melbourne,” he said.

Christopher further highlighted the political challenges in addressing the issue, noting a “political reluctance” to tackle demand. “There is a time and place for strong migration, and time and place for weaker migration, we are in a period where we need weaker migration,” he said. Dr You concurred, placing the responsibility for the housing crisis squarely on the federal government. “The blame for the problems caused by out-of-control mass-migration in recent years should be directed squarely at the federal government, not the migrants,” he added.