The View | Australia’s housing crisis and return of Chinese students a blessing and a curse for build-to-rent market

The housing crisis has focused attention on purpose-built rental housing that is typically owned, managed and operated by institutional investors

Australia’s market shows promise, but the sharp rise in construction costs and interest rates have cast doubt on the feasibility of new projects

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Buildings are reflected on a textured mirror in Brisbane, Queensland, on April 18. Australia’s emerging build-to-rent property sector holds great potential but needs more projects to become firmly established. Photo: Bloomberg

Published: 4:15pm, 8 May 2023

Australia’s National Housing Finance and Investment Corporation (NHFIC) does not mince its words. In a report published last month, it said that “at a time of returning migration, [the housing market is] contending with a perfect storm of high inflation and interest rates, slowing supply and record low vacancy rates”.

For prospective first-time buyers, the storm has felt like a category 5 hurricane. Notoriously unaffordable even before the Covid-19 pandemic erupted, Australian housing has slipped further out of reach for most would-be buyers. Despite having just suffered the sharpest fall in prices on record, the median value of a capital city dwelling is still 12 per cent higher than in March 2020, according to CoreLogic data.

More worryingly, the rental market has become increasingly unaffordable. The average rental increase in the capital cities last month reached 11.7 per cent year on year, an all-time high. The sharpest rises were in flats. In Sydney and Melbourne, rents soared 19.1 per cent and 15.2 per cent respectively, according to CoreLogic.

Several factors are at play. First, the reopening of Australia’s borders caused a stronger-than-expected increase in population growth. This has been driven by a surge in net overseas migration, with foreign students accounting for a large portion of the arrivals.

International students accounted for more than 40 per cent of tertiary enrolment before the pandemic. Many of these students rent flats in the capital cities, particularly Sydney and Melbourne, helping to drive up rents.

The return of Chinese students has heightened concerns over rental affordability. Beijing’s snap decision in January to no longer certify online degrees awarded by foreign institutions was seized on by the media, fanning fears about tens of thousands of Chinese students flooding back into Australia.

.css-1m2rp1p{color:#34b8b5;}The View | Australia’s housing crisis and return of Chinese students a blessing and a curse for build-to-rent market

The View | Australia’s housing crisis and return of Chinese students a blessing and a curse for build-to-rent market