INDUSTRY NEWSNEWSVictoria

Melbourne’s student housing reduced to “skeleton skyscrapers” amid international border closures

Border closures that stopped thousands of international students studying at Australian universities have reportedly caused entire buildings to remain vacant, impacted small businesses, and left self-funded retirees worried about how they will pay their mortgages. 

Managing Director of Student Housing Australia Mark McDonald said the border closures had far-reaching consequences that went much further than empty lecture theatres at universities.

“The education sector is the third-largest export sector in Australia, behind coal and gas,” he said.

“Of course, mining makes the GDP look fabulous. But international students aren’t just helping education. They contribute so much to our economy.

“Think of all of the takeaway shops in the CBD, the coffee shops near the universities and the transport hubs, they all rely on students spending money.  Right now, the CBD here in Melbourne is so quiet you can fire a gun down the streets. It’s eerie.

“I’ve heard of operators that have five or 10 buildings in the CBD and they have had to shut things down and move all their tenants into one building, so they only have to run that one tenant building.” 

Mr McDonald went on to explain another direct result of Australia’s border closures was vacancies in the rental market around education providers like universities, which has declined more than 30 per cent and rents have fallen in these areas.

“Many owners are without a tenant or rents have fallen below their holding costs,” he said.

“Virtually no owner of student accommodation is unaffected.

“Many owners are self-funded retirees or have mortgages on these properties and are struggling financially and there is no assistance to help them. 

“We can’t do anything about removing people who can’t pay rent, we have seen rental reductions, new legislation imposing greater costs – the hits just keep coming.

“It is going to put more pressure on the rental markets. There has not been a bond hearing at the VCAT for 18 months.”

Mr McDonald said there had been different approaches across the sector trying to solve the current student rental crisis. 

“A lot of universities have been trying to put different solutions together, but the only proposal to go ahead in the past 18 months was the 63 students the Northern Territory brought in,” he said.

“Some student housing properties have been trying to repurpose their buildings, and there is talk of using student housing for quarantine.

PropTech company Console Cloud‘s Head of Customer Success Natasha Anich revealed she had been actively tracking data on the Melbourne CBD rental market noting demand for affordable rentals but in a tight rental market. 

“We are seeing a trend of decreasing rent values across greater Melbourne, with the Melbourne CBD experiencing a nine to 15 per cent decline in rental rates in the past 18 months,” she said.

“Seeing these skeleton skyscrapers around our metro cities largely vacant and with diminishing rental returns for investors is concerning.

“You can’t help but feel for student housing operators; they have really felt the full effects of this complex market and continue to face ongoing uncertainty in their future.  

“Knowing they have the availability to accommodate a tight rental market of willing Victorians must be quite devastating, and all due to a technicality around zoning and a non-commitment to the timing on borders re-opening.”

Mr McDonald said the industry was currently stuck in limbo, waiting for an indication of when international students would be able to return to Australia. 

“What we need is some direction from the government – an indication that when we get to ‘X’ number vaccinated, we can open the borders to students,” Mr McDonald said.

“It doesn’t matter if that number is 50, 80 or 90 per cent, we just need a target that will let us know, from a business point of view, when to gear up or gear down. The vaccine is the only way out of this mess. 

“In the 20 years I have been doing this, we have had bird flu, SARS, the global financial crisis, two wars… in all of that time we have only had one family who took their daughter home because of safety concerns.”

Mr McDonald said when borders reopened Australia would be a popular destination again.

“There will be a lot of vacant apartments ready to go and we will need them,” he said.

“There will be a lot of high-end rentals and a lot of students coming back. Look at the US and the UK – the students are still travelling for study because the borders are open. They will want to return to Australia.

“We are all looking forward to vaccination levels lifting to a level that allows the Australian border to open safely for returning Australians, international students, and immigration all of which our country needs to grow and prosper.”

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