Migration now stands as a central driver of Australia’s record-setting home loan growth and domestic currency creation. Experts caution that soaring migrant arrivals have broad economic repercussions for the country. Continued demand pressures mount in key urban centres, reshaping the property and mortgage landscapes.
Migration Surge Sets Pace
Australia is facing an unprecedented migration influx in 2025. The Institute of Public Affairs confirms that the country has broken records for net permanent and long-term arrivals. The first three quarters registered the highest numbers seen in history. Daniel Wild, the IPA’s deputy executive director, stresses that this migration surge is unlike any previously recorded.
The Federal Government’s updated policies are set to reduce annual migration. Projections indicate numbers will fall from roughly 375,000 in the upcoming year to 250,000 in 2025. Without such measures, arrivals would have continued to rise, placing further pressure on the housing market.
Supply of Aussie dollars up 11%/year.
Wonder why prices are up 11%/year?
Primary driver now is new home loan issuance due to migration, 2nd is govt pissing money away on NDIS & paying salaries for new migrants as 8 in 10 new jobs are taxpayer funded: non migrant job growth is ~0 pic.twitter.com/F9L1jCc1LM— Matt Barrie (@matt_barrie) November 13, 2025
Home Loan Commitments Hit Highs
Home loan figures reveal the impact of migration-fuelled demand. As of September 2025, the national average home loan stands at $693,802. This marks a 16.6% increase from the same time the previous year. In the third quarter alone, owner-occupier home loans totalled $58.76 billion, a 4.7% jump from the previous quarter.
Loans for existing dwellings dominated—comprising 85% of the total owner-occupier value in September. Investment loans have witnessed robust growth as well, climbing by 17.3% year-on-year. Refinancing volumes are at a historic high, with nearly $65.8 billion of existing mortgages switching lenders in the September quarter.
Banking System Grows the Money Supply
Each home loan issued effectively creates money in the economy. The banking system responds to housing demand by extending credit, and this process expands the domestic money supply. Continued migration and new loan commitments have therefore contributed to rapid monetary growth.
A surge in investor lending accompanied owner-occupier demand. Investor home loans averaged $685,634 in the latest figures, rising 17.3% in the past year. Refinancing activity suggests households are seeking flexibility as conditions shift, but the amount of new credit remains elevated.
Housing Shortage Becomes a Crisis
The housing market cannot keep pace with the rising population. AMP deputy chief economist Diana Mousina says, “The high pace of immigration is not compatible with the level of housing supply that we have in this country. We’re just not building enough homes to keep up with our population growth”.
The Reserve Bank reports that rent inflation remains elevated. Rents jumped by 2.2% in the September quarter, outpacing wage growth and other living costs. Annual rent growth of 7.6% marks the highest increase since 2009. Commonwealth Rental Assistance has partly cushioned renters, but demand still far exceeds availability.
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Economic and Social Pressure Mounts
A rising population has lifted demand for both new and existing dwellings. While around 60% of permanent migrants already reside in Australia, the remaining arrivals add direct housing demand. Financial deregulation, low interest rates, and relaxed lending standards have fuelled larger and more frequent home loans.
Australian living standards are under strain. The Grattan Institute found that high-skilled, high-income migrants deliver a long-term economic dividend, but their arrival adds to immediate housing pressure. Inadequate housing supply and surging loan demand create price increases that affect a much wider segment of the population.
Expert Voices on the Risks
Daniel Wild notes, “Mainstream Australians are paying the price” for the rapid migration-fuelled growth. Former Howard government treasurer Peter Costello warns that, even as migration supports the economy and reduces skill shortages, it also drives up inflation and rental prices.
Academic researchers argue that policymakers must address data, evaluation, and program design to smooth impacts. Calls for sweeping migration system reviews have grown louder, with attention focused on better matching migrant inflows with infrastructure and housing capacity.
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Government’s Response and Outlook
The Albanese government has announced a 10-year migration strategy intended to realign migration with the national interest. A reduction in the targeted intake aims to provide relief, but its effectiveness will take time to materialise in the housing market.
Loan commitment data provides a direct measure of demand, but underlying supply constraints remain. Average sizes of home loans have doubled in the ACT over the last decade, with other states close behind. First-home buyers face an average loan of $560,249, about 16% higher than a year ago.
The Feedback Loop: Credit, Migration, and the Dollar
Home loans act as the primary pipeline for money creation in the Australian economy. Increased migration swells housing demand, directly expanding the value of mortgages and therefore the domestic dollar supply. Banks lend on the back of property transactions, amplifying economic cycles.
If migration-fuelled home loan growth continues, monetary policy and housing strategies must adapt. Analysts caution that unchecked demand could prolong high inflation, exacerbate housing shortages, and undermine broader economic stability.
The Path Forward for Policymakers
Addressing housing shortages will require targeted construction and better planning. Sustained demand from migration and investor activity is now a permanent fixture in the housing equation. Official forecasts expect ongoing upward pressure on loan values and rents through the next financial year.
As supply lags, experts warn that strong governance is imperative. Daniel Wild concludes, “Australia is experiencing an unprecedented migration surge.” Policymakers must now balance the benefits of diversity and economic growth with the risks of overheating housing markets and inflationary challenges. The creation of home loan-driven dollars ties both sides of the equation together more closely than ever before.
