In many developed countries, a reliable engine for economic expansion is showing signs of strain. For years, the steady flow of immigrants has helped countries like Canada, Australia, and the U.K. counteract the economic challenges posed by aging populations and declining birth rates. However, this trend is encountering a significant obstacle: a severe shortage of housing.
As borders reopened post-pandemic, a surge of newcomers collided with a chronic lack of homes to accommodate them. While Canada and Australia have managed to avoid recessions since the onset of COVID-19, their citizens haven't been spared from deep per-capita downturns, eroding living standards. Similarly, the U.K. faced a milder recession on paper, but per-person measurements revealed a deeper and more prolonged economic slump.
Exclusive analysis by Bloomberg Economics found that thirteen developed economies were in per-capita recessions by the end of the previous year. While various factors contribute to this, such as a shift towards less productive service jobs, housing shortages and associated cost-of-living pressures emerge as common denominators.
Despite these challenges, the immigration-driven economic model isn't entirely doomed. For instance, Australia has seen approximately one million people, equivalent to 3.7 percent of its population since June 2022, addressing labor shortages in key sectors like hospitality, aged care, and agriculture. Similarly, the U.K. has relied on arrivals from regions like Ukraine and Hong Kong to fill workforce gaps post-Brexit.
However, skills shortages persist across these economies, necessitating more workers rather than fewer. This influx, though, strains housing availability and exacerbates cost-of-living pressures. In Canada, for instance, despite record population growth, housing supply struggles to keep pace, leading to soaring prices and rental costs.
The Canadian government, recognizing the strain, has scaled back immigration ambitions, aiming to reduce the population growth of temporary residents over the next three years. Similar challenges are mirrored in Australia, where efforts to boost migration exacerbate housing crises and economic fragility.
In Europe, countries like Germany and the U.K. grapple with per-capita recessions amid rising political tensions over immigration and housing shortages. These issues highlight the delicate balance between immigration-driven growth and sustainable economic development, underscoring the need for comprehensive policy measures to address housing affordability and bolster living standards for both newcomers and existing populations.
