PHOTO: Demand for new dwellings is forecast to collapse owing to a major fall in Australian population growth. CREDIT: PAUL JEFFERS

The biggest collapse in Australia’s population growth since World War I will drive a huge fall in new home construction that could hold back the nation’s recovery from the coronavirus recession.

Research released on Monday by the federal government’s National Housing Finance and Investment Corporation forecasts that demand for housing could be cut by between 129,000 and 232,000 dwellings over the next three years in a development that would hit the vital construction sector.

Rents, particularly in the inner suburbs of Sydney and Melbourne, also face a sharp fall as a lack of international students exacerbates an expected fall in the number of migrants wanting to call Australia home.

About 60 per cent of the nation’s population growth over the past decade has been driven by net overseas migration, which totals 2.7 million residents. But the closure of the border, as well as concern globally among people moving between nations, is expected to lead to that collapse.

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.