Across the whole Australian population of more than 25 million people, a decline in average household size of the extent shown in Graph 1 would add about 140,000 households. This is a necessarily rough calculation and, as I mentioned, we will know more when the Census results are released. In broad terms, though, these two factors have roughly offset each other.
This suggests that the number of homes demanded didn't changed much throughout the pandemic. There's a broader point to be made here: things always adjust. If average household size hadn't declined, there would have been fewer households to fill the new homes being built. Instead of the result being a swathe of empty homes, though, prices would have adjusted – in this case, rents.