Setting the Record Straight: Why House Prices Rose During COVID Without Immigration
Critics who claim “mass immigration doesn’t increase house prices” love pointing to the COVID period: borders slammed shut, net overseas migration turned negative (a record net outflow of ~89,000 in 2020-21), yet house prices exploded. “Proof!” they declare. This argument is intellectually dishonest and economically illiterate.
Yes, prices did surge - dramatically. After a brief 2.1% dip in early 2020, national dwelling values rose around 24-25% from the pandemic’s onset to early 2022, with cumulative gains of 30-38% by 2023 in many measures. Regional areas boomed even harder (up to 36-47% at peaks). But the absence of overseas arrivals does not disprove that immigration drives demand and therefore prices. It simply proves that immigration is not the only source of increased housing demand.
During the COVID-19 pandemic, Australia's massive fiscal stimulus packages, including wage subsidies like JobKeeper and cash flow boosts, created windfalls for many business owners and households by injecting billions into the economy, often exceeding immediate needs and providing surplus capital for investments. Coupled with forced savings - where lockdowns curtailed spending on travel, dining, and entertainment, leading to a record $200 billion in excess household savings by mid-2021 - this influx of liquidity fueled heightened demand for housing as people sought larger homes for remote work or invested in property as a safe asset. Simultaneously, the Reserve Bank of Australia's aggressive monetary policies, such as slashing interest rates to historic lows (0.1% cash rate) and implementing quantitative easing through $188–200 billion in bond purchases via the Term Funding Facility, made borrowing exceptionally cheap and abundant, with banks channeling much of this credit into mortgages rather than business loans. These factors converged to ignite a property boom, driving national house prices up by over 38% from March 2020 to early 2025, as increased buyer competition, low borrowing costs, and abundant capital overwhelmed supply constraints, exacerbating affordability issues and widening wealth gaps.
Two other critical demand surges are too often ignored. Over half a million cashed-up Australian expats returned home during the pandemic, bringing overseas savings and joining the buyer pool. At the same time, average household size fell sharply - from around 2.55 to a record low of 2.48 by mid-2022 - creating the equivalent of roughly 120,000 additional households demanding separate dwellings for the same population. Work-from-home preferences further shifted demand toward larger homes and regional properties.
The lesson is straightforward: extra demand for housing - whether from mass immigration, government stimulus, smaller household sizes, returning citizens, or lifestyle shifts - pushes prices and rents higher when supply is constrained. Pretending the COVID boom “proves” immigration has no effect is like claiming extra cars don’t cause traffic because extra bikes do too. Increased demand is increased demand. The mechanism doesn’t care about the source.