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How reopened borders are fuelling the inner-city apartment market

A tough couple of years defined by lockdowns and international border closures hasn’t been kind to the Australian inner-city apartment market, but now that those borders are finally opening again to welcome an influx of immigrants and international students, things are expected to take a big, positive swing in the other direction.

Since the Australian Government opened the border to international students in mid-December last year, the three months that followed saw an increase of 37,2351theconversation.com foreign students, bringing the national total to 330,6782dese.gov.au as of March 2022.

A further 115,6253dese.gov.au student visa holders may currently be situated outside of Australia, and there are still about 300,000 fewer international students in the country than there were before the pandemic.4theconversation.com But policies are being put in place to entice them back, such as refunds on eligible visa application charges and a relaxation of student visa work limits.

Regardless of whether or not these measures actually work, one thing is for certain: demand for inner-city apartments in Australian capital cities is growing now that borders have reopened, and that demand is only going to become more fervent as the months go by.

CoreLogic’s Hedonic Home Value Index report from January 2022 acknowledges that the Australian inner-city rental market has been adversely affected by border closures and lockdowns, which has kept tourists, immigrants and international students from entering the country, but it also reports that 2022 is already tracking higher in terms of investors actively seeking out inner-city apartments.

“Rental demand from this cohort of migrants [international students] is likely to be most concentrated across the inner-city precincts of the capital cities and within close proximity to academic hubs,” CoreLogic’s Head of Research, Eliza Owen, told the ABC.5abc.net.au

According to Owen, there may be a few factors involving international students that could affect the recovery of the market, including a blowout in visa-processing times and the policies of travellers’ home countries (for example, the US Centers for Disease Control and Prevention currently recommends avoiding travel to Australia).

The demand for inner-city apartment rentals has, of course, placed the market in favour of landlords, with rental prices increasing around the country.

My Housing Market figures have revealed that, in the 12 months to February 28, 2022, Sydney unit rents grew, on average, 6.7% to $480.6smh.com.au

Melbourne, the other Australian capital city that’s a major drawcard for international students, tourists and immigrants, went in the opposite direction: unit rents dropped 2.6% to $360, with vacancy rates still a relatively healthy 2.9%.7smh.com.au

The Purpose Built Student Accommodation (PBSA) sector, often seen as a means to generate long-term, stable income returns, is also benefitting from Australian borders opening.

Savills, an Australian real estate agency which deals solely with institutional investors, reports that occupancy levels have bounced back to 70-80% in some PBSA buildings for semester one, 2022, signalling a strong rebound in the market.8scmp.com

“The inner-city market over the past 12 to 18 months has been dominated by the owner-occupier, and especially the first homebuyer, due to low interest rates and stamp-duty savings. Inner-city apartments have been an affordable option for many to get their foothold in home ownership,” Robert Eggers, Director at Dingle Partners in Melbourne, told the South China Post.

“This doesn’t only apply to purpose-built accommodation, where in some cases all tenants must be full-time students. It is advantageous for investors to look for opportunities not restricted to students only. A broad-based rental pool of potential tenants is always wise.”


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