The number of international students, who account for about half of net overseas migration, has also collapsed in a development that has forced some major universities to cut staff.
The corporation, which provides advice to the government on housing demand, estimates that in a worst-case scenario there would be 214,000 fewer people in the country than if the coronavirus had not occurred, between 2019 and 2021.
It would be the biggest slowdown in population growth since 1916 and 1917 when hundreds of thousands of Australians were overseas involved in World War I.
That sharp fall in people will feed directly into fewer dwellings.
After the construction of about 162,000 dwellings last year, the corporation believes this could drop to 137,000 this year, to 108,000 next year and then just 72,000 in 2022.
If population growth holds up a little better, the market would bottom at 110,000 in 2022. Even that would be the worst annual performance since the 1980s.
The drop-off in construction would then amplify the economic pain being felt by the country.
“If this decline is sustained, it could cause a contraction in construction activity that will add to the recessionary forces impacting on the economy,” it found.
“Australia’s second wave of infections is likely to further slow population growth, adding to the depth of the downturn and hindering the pace of recovery in underlying housing demand.”
The corporation says the drop in population growth will also hit rental markets, particularly those dependent on international students.
In Melbourne’s CBD, advertised rents are down by more than 22 per cent since March. and in neighbouring Southbank they have dropped by more than 13 per cent.
Sydney’s Darlinghurst has been one of the worst-hit areas in the country, with advertised rents down by almost 25 per cent. They have fallen by 15 per cent in The Rocks and across Haymarket.
Data this week is expected to show population growth slowing to its lowest rate since 2005, when it was 1.3 per cent, owing largely to the fall in net migration. The figures will cover the first three months of the year, only taking in some of the early border closures to visitors from particular nations such as China.
Research by the Reserve Bank’s economics department, released on Thursday, also highlighted the likely impact of coronavirus outbreak on the rental market.
It found rents in inner-city suburbs will be subdued for an extended period.
“The closure of international borders magnified the demand shock, as the flow of international students and other migrants who typically rent has slowed,” they found.
“Over the next few years, it is likely that rents in these inner-city areas will remain lower than expected pre-pandemic given lower population growth and the anticipated supply of apartments coming on line in these markets.”
Shane is a senior economics correspondent for The Age and The Sydney Morning Herald.