An unexpected edict from Beijing places a new layer of demand on inner-city apartment markets where prices are already rising by more than 20 per cent a year.
NAB Markets Research latest property report notes that overseas students are returning to ‘‘a very tight market where rents are rebounding”.
Tapas Strickland, head of market economics at NAB Markets Research says: “A lot more overseas students coming back into these inner-city markets loads further pressure on rents immediately.”
As The Australian has reported, the return of Chinese students to Australia could be worth $5bn for the wider economy, but not without extracting a price on the residential market.
Torie Brown, executive director, student accommodation, at the Property Council of Australia suggests: “Unfortunately, specialist student accommodation is already tight – there are zero vacancies in some cities such as Brisbane, while other centres are filling up fast.”
Overseas students will be looking for rental accommodation in the most overheated districts of cities where apartment rentals are rising faster than any other property category.
Analysts suggest rent prices are still rising by up to 2 per cent a month, while across the major cities overall “asking rents” jumped by up to 25 per cent in 2022 – around three times the level of inflation.
“We are talking about 40,000 students coming back into the market. And that is just students from China, we also have students returning from all over the world,” Brown suggests.
She says the lack of local investment in student accommodation, along with a stand-off among investors in the residential rental market, has exacerbated the problems facing the sector.
“We can’t get local investors into student accommodation, the big super funds do not go near it though they are willing to enter this area in other markets such as the UK and Canada. In our market the money is almost entirely from offshore investors,” she says.
Strickland suggests investors will become more interested in the property sector as they become aware of the improving rental returns in the market, but for now investor lending for property remains stuck at long-term average levels.
The Property Council, which describes the education sector as “Australia’s largest service industry export” has lobbied to get more student accommodation constructed, partly through making it more attractive for foreign investors.
According to a report from the council, special transaction fees imposed on foreign investors for a $50m residential property are more than $1m, but just $13,200 for a commercial property.
“While there have been some GST and managed investment trust supports for purpose built student accommodation (PBSA), the sector still faces headwinds,” the report suggests.
The council also argues that PBSA bolsters rental supply by providing additional housing options that equates to around two- thirds of current private rental vacancies. As the property industry would have it, this means that without PBSA the broader rental crisis could be even worse.
Rental vacancy rates across Australia are hovering around 1 per cent and may even tighten further in the months ahead.
Separately, universities are under pressure to improve student accommodation, especially those with campuses in the inner cities. Shortages of student accommodation in other markets – especially Europe – have prompted government intervention which creates new problems in crimping the wider education sector.
Among the tightest housing markets in the world, Holland and Ireland have seen a range of initiatives to alleviate a deepening rental crisis. After months of political pressure in Holland, the government stepped in last month to direct universities to stop receiving international students.
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The nationwide rent crisis is about to get worse as 40,000 Chinese students have been told to return to Australia to finish their face-to-face studies immediately.