Foreign student arrivals surge in Australian states
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Foreign student arrivals surge in Australian states

As the academic year geared up, overseas students returned to Australia in droves during February

By KANEBRIDGE NEWS
Mon, Apr 24, 2023 9:30amGrey Clock < 1 min

The number of foreign students returning to Australia is on the rise, spelling good news for suburbs with high levels of student accommodation.

Data from Ray White shows that 140,000 foreign students returned to Australia in February, with NSW and Victoria leading the way.

During the height of the pandemic in 2021, areas with higher levels of student accommodation saw significant falls, with Melbourne CBD recording the highest drops. Ray White chief economist Nerida Conisbee said rental levels in that city fell by 23 percent and prices dropped by 7 percent during 2021, which had a flow-on effect to commercial property in those areas, such as retail properties that relied on that market. Ray White data showed that prior to the pandemic, the numbers of foreign students rose steadily from just under 300,000 in 2006 to more than 800,000 in 2020 before falling to less than 100,000 during COVID.

However, figures show that 49,160 students arrived in NSW in February, with another 47,970 students heading to Victoria. Queensland was the next most popular destination, with 19,300 students arriving ahead of the start of the academic year, followed by Western Australia with 11,850.

Ms Conisbee said rents had already begun to rise quickly, reaching pre pandemic levels, although values had not kept a similar pace. That is expected to happen later this year, she said, noting she is hopeful it will spark a new construction cycle for further affordable student housing.



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Stronger demand in some areas is pushing unit rents up faster than houses

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Renters are returning to the apartment market, leading to higher growth in weekly rents for units than houses over the past year, according to REA data. As workers return to their corporate offices, tenants are coming back to the inner city and choosing apartment living for its affordability.

This is a reversal of the pandemic trend which saw many renters leave their inner city units to rent affordable houses on the outskirts. Working from home meant they did not have to commute to the CBD, so they moved into large houses in outer areas where they could enjoy more space and privacy.

REA Group economic analyst Megan Lieu said the return to apartment living among tenants began in late 2021, when most lockdown restrictions were lifted, and accelerated in 2022 after Australia’s international border reopened.

Following the reopening of offices and in-person work, living within close proximity to CBDs has regained importance,” Ms Lieu said.Units not only tend to be located closer to public transport and in inner city areas, but are also cheaper to rent compared to houses in similar areas. For these reasons, it is unsurprising that units, particularly those in inner city areas, are growing in popularity among renters.

But the return to work in the CBD is not the only factor driving demand for apartment rentals. Rapidly rising weekly rents for all types of property, coupled with a cost-of-living crisis created by high inflation, has forced tenants to look for cheaper accommodation. This typically means compromising on space, with many families embracing apartment living again. At the same time, a huge wave of migration led by international students has turbocharged demand for unit rentals in inner city areas, in particular, because this is where many universities are located.

But it’s not simply a demand-side equation. Lockdowns put a pause on building activity, which reduced the supply of new rental homes to the market. People had to wait longer for their new houses to be built, which meant many of them were forced to remain in rental homes longer than expected. On top of that, a chronic shortage of social housing continued to push more people into the private rental market. After the world reopened, disrupted supply chains meant the cost of building increased, the supply of materials was strained, and a shortage of labour delayed projects.

All of this has driven up rents for all types of property, and the strength of demand has allowed landlords to raise rents more than usual to help them recover the increased costs of servicing their mortgages following 13 interest rate rises since May 2022. Many applicants for rentals are also offering more rent than advertised just to secure a home, which is pushing rental values even higher.

Tenants’ reversion to preferring apartments over houses is a nationwide trend that has led to stronger rental growth for units than houses, especially in the capital cities, says Ms Lieu. “Year-on-year, national weekly house rents have increased by 10.5 percent, an increase of $55 per week,” she said.However, unit rents have increased by 17 percent, which equates to an $80 weekly increase.

The variance is greatest in the capital cities where unit rents have risen twice as fast as house rents. Sydney is the most expensive city to rent in today, according to REA data. The house rent median is $720 per week, up 10.8 percent over the past year. The apartment rental median is $650 per week, up 18.2 percent. In Brisbane, the median house rent is $600 per week, up 9.1 percent over the past year, while the median rent for units is $535 per week, up 18.9 percent. In Melbourne, the median house rent is $540 per week, up 13.7 percent, while the apartment median is $500 per week, up 16.3 percent.

In regional markets, Queensland is the most expensive place to rent either a house or an apartment. The house median rent in regional Queensland is $600 per week, up 9.1 percent year-onyear, while the apartment median rent is $525, up 16.7 percent.

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