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Return of overseas students could place further pressure on rents

An anticipated increase in the number of overseas students coming to Australia following the Chinese Government’s edict that students must return to face-to-face study could lead to rent rises of five per cent or more, one expert predicts.

The directive from the Chinese Government could see 50,000 or more students returning to Australia in the coming weeks, according to one estimate.

Kent Lardner, founder of Suburbtrends, told The Australian Financial Review that suburbs close to universities will see the highest number of students.

“The return of the Chinese students is likely to make this competition rather fierce, and I expect to see rental increases of at least five per cent in the next four weeks or so,” Mr Lardner told the AFR.

He said that the return of Chinese students would come at an already busy time for the rental market.

“We usually see an increase in vacancy rates in the suburbs around the university campuses over the Christmas break, but in the coming weeks, students will be returning, and new students begin their search, which will see vacancies quickly drop to below one per cent in most suburbs,” Mr Lardner said.

SQM Research Managing Director Louis Christopher told the AFR that the boost to the number of overseas students would affect the Sydney and Melbourne markets the most.

“It’s probably safe to assume that many of these students will be looking to live in these cities, Mr Christopher said.

“At this point, we’ve only got hundreds of available dwellings in Sydney and similarly across inner Melbourne, so there is the potential to create a problem on top of the issues we already have in the rental market.

“This is a significant development for the rental market, which means vacancy rates will probably fall to record lows again and push rents higher particularly in the city areas of Sydney and Melbourne.”

Ray White Chief Economist Nerida Conisbee told Elite Agent that while it was unclear what proportion of China-based students had already made the return to Australia, if 50,000 students were to return it would place significant pressure on the rental market.

“If they all have to come to Australia, that will be an enormous pressure on housing demand,” Ms Conisbee said.

PRD Chief Economist Dr Diaswati Mardiasmo said that while Australia’s current level of international students remained lower than it was pre-Covid, it wasn’t far off.

“The demand from international students is not at pre-Covid levels yet, (but) this will continue to increase,” Dr Mardiasmo said.

“Especially with our borders now fully open, Australian education providers intensively promoting their institution, and our reputation when it comes to COVID-19 management.

“However data shows that it’s not that too far off pre-Covid levels… We are about 150,000 short, which is still a big number, however its not a situation where we currently only have 20 per cent of pre-Covid numbers – in fact we are at 81 per cent.”

She said that a return to pre-Covid student numbers would put further pressure on rents, but that this wouldn’t be dramatic.

“Because we will continue to see growth in the number of international students we will continue to see rental price increase, especially for units (as that is the property type that most students would apply for), however I would not say that it would be a big jump,” she said.

Rents already sky high

City rents have already been under pressure following the relaxation of border restrictions in early 2022.

The latest Domain Rent Report shows Australia recorded its steepest annual rental increase on record in 2022.

Across the combined capitals house rents soared 14.6 per cent while units climbed 17.6 per cent, with rents at record highs across all cities, apart from Darwin, and in Perth for units.

Domain Chief of Research and Economics Dr Nicola Powell said the rental market had become extraordinarily tight due to increased tourism and overseas migration.

Overseas students were also placing greater pressure on supply, which fuels the landlord’s market and puts increased pressure on tenants across much of the country.

“Nationally, asking rents are at historic highs across all cities (apart from Darwin and units in Perth), rents are rising at the fastest annual pace ever seen across the combined capitals and the number of vacant rental properties is at an all-time low for the month of December,” Dr Powell said.

Move toward face-to-face learning

The directive to return to face-to-face learning isn’t unique to the Chinese Government, with many training institutions bringing in face-to-face examination requirements in response to the rise of AI-powered software like ChatGPT.

Australia’s Group of Eight universities announced earlier in January that they had revised how they would run assessments in 2023 due to the emergent technology and the potential for cheating.

This included a return to supervised exams sat using pen and paper, according to The Guardian.

In the real estate sector, changes to the Continuing Professional Development requirements will see agents required to participate in interactive sessions.

In an exclusive interview to be published in the next edition of Elite Agent magazine, NSW Property Services Commissioner John Minns said the changes would help prevent unsavoury practices, such agents having someone else complete their CPD for them, as well as helping to embed the learning.

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Jack Needham

Jack Needham was a Digital Editor at Elite Agent in 2022 & 2023

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