‘Pain before gain’ – Investors will return with the international students

“Investors who already own property and are suffering may want to hang in there for another six or 12 months.”

That’s the advice from Juwai IQI Executive Chairman Georg Chmiel, who has provided insights on a new report from the Mitchell Institute on COVID-19’s continued impact on our country’s intake of international students.

The key points from the Mitchell report are:

• Applications for international student visas are approximately 80–90 per cent below the same time in 2019.
  
• There are approximately 210,000 fewer international students in Australia than would otherwise be expected.
  
• Between the end of March to October 25, there was a reduction of approximately 75,000 currently enrolled international students.
  
• Modelling based on the rate of decline experienced in
  the first six months of the pandemic suggests that there will be an approximate 50 per cent reduction in international students inside Australia by July 2021, from October 2019.

“It will be pain before gain,” Mr Chmiel explained.

“Student numbers are likely to keep falling and vacancies to keep rising until mid-2021. Then, we believe student numbers will climb to higher than their 2019 peak. 

“This is the current situation. Chinese buyer inquiries are down to just half the level of a year ago. These numbers parallel to the drop in student visas.

“The good news is that there are 135,000 international students, mostly Chinese, enrolled in Australia right now but studying from their home countries.

“This large cohort of students could quickly return to Australia when travel is again possible and help the real estate market bounce back in the hardest-hit areas. Chinese account for 62 per cent of international students who are enrolled but cannot get into the country.” 

This is the silver lining, according to Mr Chmiel.

“Education is a major factor that drives Chinese purposes of homes here.

“Students occupy housing while studying, go on after graduation to take jobs here and form new households, and often draw parents and other family members to the country over time. 

“Student numbers will begin climbing again, your rents will go back up, and your investment will regain lost value,” he said.

Mr Chmiel’s advice to those looking to take advantage of this dip in the market is to purchase in the hardest-hit suburbs from an owner who can no longer pay the mortgage with the lower rents.

“Look for investments with more space, outdoor space, and nearby parks and outdoor amenities,” he advised.

“Even after the pandemic, buyers and renters will be seeking more liveable property. It takes a brave investor to purchase when the market is hurting, but it can be worthwhile.” 

Looking into his crystal ball, Mr Chmiel feels it’s unlikely that student numbers will continue to drop – a situation he says “would be devastating for the property market in key suburbs”.

Instead, he noted: “In the best and most likely case, the country will reopen in mid-2021. Student numbers will begin to climb again in the second half towards and beyond their 2019 peak”.

“Safety and educational quality are the two key factors that motivate students when they choose where in the world to study,” Mr Chmiel said.

“Our clients in China, India, Malaysia, and other parts of Asia tell us that they would feel safer travelling to Australia to study in 2021 and 2022 than the United States or the United Kingdom.

“It’s true that the world’s top few universities are in the US and the UK. But most of the hundreds of thousands of international students to travel around the world go to the second and third-tier institutions.

“Australia has a large number of very, very good universities in the second tier. Australian universities appeal to students who want the best possible Education despite missing out on Harvard or Oxford. 

“How long this lasts depends on how long the travel bans persist. Australia could wait for the vaccines or open additional travel bubbles like it has done with New Zealand to enable students from no-case countries to come to study.” 

Every second counts, too, as Mr Chmiel emphasises.

“Remember that education is one of our largest exports in Australia,” he explained.

“It generates $32 billion of benefits for Australia every year. It is also one of the most labour-intensive exports, meaning it spreads jobs across the economy in a way that mining does not.

“Precisely 57 per cent, or about AU$21.4 billion, per year in international education revenue is actually spent on goods and services in the wider economy. 

“Some 800,000 Chinese students study each year in the US, UK, Australia, Canada, and New Zealand. Their total economic contribution to those countries is estimated at US$113.3 billion.”