Exiting students leave accommodation market with challenges
Accommodation vacancies have surged across Australia after a growing exodus of foreign students and workers, prompting warnings that rents and house prices will come under severe pressure this year as the economy enters a major downturn.
REA Group data show the number of “furnished listings” have more than doubled to 2207 from early March to early April. Nerida Conisbee, its chief economist, says the exodus of people from Australia is having an “immediate impact” on the housing market.
On Thursday, The Australian revealed the population could fall by the largest absolute amount ever in the nation’s history as up to 600,000 temporary migrants, mainly students and foreign workers, returned home amid the corona virus crisis.
“With fewer foreign students, rental properties close to universities are becoming increasingly vacant, which is being compounded by many Australian university students moving back home with parents,” Conisbee says.
The biggest increases in vacancies were in locations where students tended to live, as well as holiday destinations, such as inner-city Melbourne, Sydney and Surfers Paradise.
“Not only do we have fewer renters, we also have fewer renters being able to pay market rent and an increase in rental listings. The distress in the rental market will flow on to the values of properties, but it is too early to tell what the extent will be,” she adds.
Economist Saul Eslake says the exodus of people will almost certainly see rents and house prices fall, and hit the construction sector. “We physically build between 150,000 and 200,000 new dwelling units a year, so we probably won’t be doing that this year,” he says.
Peter Abelson, who was commissioned by the NSW Treasury, says house prices are more likely to fall by 10% than 30% as interest rates are “overwhelmingly the dominant factor in determining prices”.
“After the 1990s recession and around the global financial crisis, what we saw was people simply holding off selling and turnover rates would fall by 40% or so, while house prices did not fall so dramatically,” he says. “Over here in the north shore we don’t have many foreigners but Sydney’s eastern suburbs, especially Bondi, will be hit hard,” Abelson, who was mayor of Mosman, told The Australian.
Eslake says how many of the one million plus Australians living abroad return home is a big unknown in the estimates.
Jennifer Robinson, an Australian human rights lawyer who advised Julian Assange, recently returned home from London, telling the Australian the “eternal question for expats is when to move home”. “A time of crisis like this throws that question into sharp relief and as soon as I heard that transit ports were closing, I rushed to the airport and was lucky to get home when I did.”
This article originally appeared on www.theaustralian.com.au/property.
