Inner-city rents may jump 5pc with return of 55,000 Chinese students

Among those eager to return to face-to-face teaching is University of Melbourne final-year science student Tony Ru, 22, who said he had heard the Chinese government’s directive to hold classes in person attended and welcomed it.

He has been studying online for the past two years and is looking forward to spending more time on campus.

“It’s a good thing. Absolutely,” Mr Ru, who grew up in Shanghai, told The Australian Financial Review.

An emergency meeting was called for Monday afternoon between university representatives and officials from the departments of home affairs and education.

Universities were told that Chinese officials had updated the directive three times since then and appeared willing to be flexible.

The total number of people with visas and new applicants is estimated to result in around an additional 50,000 students in the coming weeks, said Luke Sheehy of the Australian Technology Network.

Universities have also been reassured that visa processing is in hand and that new student visa applications from China are cleared within 13 days.

Universities Australia chief executive Catriona Jackson said improved bilateral relations between China and Australia meant that lines of communication were open and that Chinese officials appeared willing to compromise their initial hard line.

“I am relieved to hear that the number of flights from China has increased from nine to 45 per week. “I’m not saying there won’t be logistical issues, but the most important thing is that the flow of information between the Australian and Chinese governments has resumed,” Ms Jackson said.

Phil Honeywood from the International Education Association of Australia said it was clear some students would have to continue learning online for several weeks as they sought airline seats and accommodation with the assurance needed that their degree would still be recognised. .

However, universities may struggle to absorb 50,000 or more students, with most not expecting to return to full face-to-face teaching until the middle of the year.

The increased demand from Chinese students could put further pressure on the already tight inner-city rental markets, particularly in Sydney and Melbourne, said Louis Christopher, managing director of SQM Research.

“It is probably safe to assume that many of these students will want to live in these cities, Mr Christopher said.

“At this stage we only have hundreds of available properties in Sydney and similarly in inner city Melbourne, so there is the potential to create a problem on top of the problems we already have in the rental market,”

“This is a significant development for the rental market, meaning vacancy rates are likely to fall back to record lows and drive rents higher, particularly in the inner-city areas of Sydney and Melbourne.”

Less available rent

CBD vacancy rates in Sydney rose to 3.6 per cent from 3.2 per cent in December and in Melbourne rates rose to 3.3 per cent from 2.5 per cent, but these should turn around quickly in February as rental demand picks up amid of a low supply, Mr Christopher said.

Sydney’s rental market has already tightened dramatically in recent weeks, said Melissa Morgan, principal and property manager of Progressive Property in inner Sydney.

“Since the start of the year we have found that supply has shrunk and what was hanging around last year has disappeared,” Ms Morgan said.

“We are also seeing less available rent, probably because some landlords who were hit hard during COVID have sold their investment properties, and potential investors are staying away due to higher interest rates.

“So with an influx of students coming in, and less stock available, tenants are going to have more difficulty finding suitable accommodation, and of course this is going to push rents up further in denser areas near universities, which are already under quite a lot of pressure .”

In the past 12 months, inner Melbourne unit rents rose 33.6 per cent, while Sydney’s climbed 23 per cent as vacancies shrank to 1.6 per cent in Melbourne and to 1.1 per cent in Sydney fell, CoreLogic said.

“These areas are already showing extremely tight rental vacancy rates and rental growth in inner city unit areas of Melbourne and Sydney has led the nation over the past 12 months,” CoreLogic research director Tim Lawless said.

“Against this background of already extremely limited rental supply, a further boost to demand from a surge in foreign students will push rents even higher.

“As these areas become increasingly unaffordable, we may see rental demand move outwards, particularly to those areas with efficient public transport options.”

The expected surge in Chinese students comes as a further boost to the country’s international education market, which is already undergoing a healthy recovery thanks to unprecedented demand from Indian students.

Rents have risen as much as 10 percent on pre-pandemic levels for bookings in 2023 in the student accommodation sector, which is dominated by operators such as Scape, Cedar Pacific and Iglu.

Students in China began contacting agents within 24 hours of the announcement, said Anouk Darling, Scape’s chief executive.

“The demand profile is now very lively. The Chinese market is an important part of that, so we couldn’t be more delighted,” she said.

With a portfolio of around 16,000 beds nationally, Scape’s vacancy rates have rebounded strongly since the pandemic lockdowns, reaching the high 90 per cent range in NSW and Queensland. After repeated cuts, its Victorian portfolio has recovered more slowly, with a vacancy rate in the 70 per cent range.

Another major player is US operator Cedar Pacific, with 5,500 beds operating in Australia and a portfolio of almost double that in Australia and New Zealand, including its development pipeline.

Chief executive Bernie Armstrong said the expected return of Chinese students “can only be good news” with the speed of their transport from China the only limiting factor to that boost.

“This will be particularly beneficial for the Melbourne student accommodation market, which is probably the slowest to recover of all the markets,” he said.