The Impact of International Students on Australia's Rental Crisis

An Australian think tank, the Institute of Public Affairs, has released a report highlighting the impact that international students have had on the current rental crisis.

The rental crisis plaguing Australian cities has seen rents increase a whopping 11.7 percent over the year to May – in the strongest annual rent growth ever recorded across the capitals.

It comes as a surge in demand clashes with a shortfall in housing stock, creating competition between tenants to secure a property.

But most Australians are questioning where the newfound demand has come from, and why there’s such a scarcity in housing options on the market.

The IPA report may have an answer.

It revealed that international students took up 70 percent of the new units supplied to the housing market last year, leaving a measly 30 percent of new units for the remainder of the population living in Australia, including other migrants who aren’t students.

It coincides with the federal government accepting more than 250,000 international students last year, in the largest ever net intake on record, and more than double the previous record of 122,000 in 2009.

Before the pandemic, the percentage of new housing units that were occupied by international students was only 17 percent. But that figure has been completely inflated and will continue to sit well above average over the next five years. 

Over the next financial year, international students are forecasted to claim 54 percent of new housing units added to the market. Over the five years to 2028, international students are expected to claim an average of 36 percent of new housing units.

The extra demand will push rents higher, and potentially house prices too, as competition heats up to secure housing.

The crisis is set to worsen

According to the report, Australia will welcome another 186,828 international students over the next financial year. Which equates to the creation of roughly 75,000 additional households.

It’s a slight easing of the 101,576 new households that were created by international students in the financial year just gone, but it’s a concerning figure nevertheless. 

Australia is already battling a housing crisis with reduced numbers of new builds starting and record low vacancy rates wreaking havoc on the hip pockets of renters nationwide, and according to these figures, there’s no end in sight.

The government has attempted to step in and bolster housing supply, albeit it slightly too late, but attempts have been made redundant, at least for now.

The government’s Housing Australia Future Fund bill is being held up in the senate by the Greens party. Just last month Senator Jackie Lambie blasted them, voicing the nation’s frustrations in an appearance on SkyNews.

“You’re bringing people in here left, right and centre – where are you putting them?” said Senator Lambie.

“At Australia’s own risk of them not having a roof over their head. This is a much bigger issue going on, so at least can we please get this housing bill through and get started from there?” said Ms Lambie.

All the result of misled numbers 

The report notes that multiple amendments to forecasting indicates that the government missed the mark on expected migrants – big time.

Australia welcomed 70 percent more migrants than were originally expected in the financial year ending 2023, and housing supply was somewhat blindsighted.

Instead of ramping up construction efforts, the amount of new builds has reduced, on the back of logistical and supply side constraints that emerged from the pandemic.

Before Covid19 hit Australian shores, we were building 200,000 units annually. By 2025, we will hit a low of 127,500 before increasing again. Housing supply is historically slow to respond to demand, and this event is proof of that.

Labor defends migration policy

The Labor government has defended their migration policy, claiming that the large figures will only just put numbers back on the table that were lost during Covid19. 

Anthony Albanese was met with protests when he visited Hobart in April, to announce a new stadium. Angry residents demanded that he prioritise housing, and consider where the unprecedented numbers of coming migrants would live.

But Albanese maintained that the migration figures would only replenish lost stocks.

“There’s been a pandemic. That meant our borders were closed. That meant people weren’t coming in,” said Mr Albanese, dismissing calls that migration was too large for Australia to handle.

It’s been a narrative repeatedly touted in the media, but as the IPA report points out, it’s simply wrong.

The population figures lost during the pandemic due to international students returning to overseas homes has well and truly been regained already. Now we’re back in a surplus.

“The total number of net student arrivals in the current and previous financial years, which would have compensated for the pandemic related decline, in order to maintain the pre-covid average intake, is therefore 355,656 net new students,” read the report.

“Given the expectation of a net intake of 440,768 students over this period, the notion that the influx of students in the last two financial years is merely to compensate for the covid-19 decline is unjustified.”

According to these figures, by the end of this financial year we’ll have welcomed 85,112 more migrants than would have been expected if the pandemic had never occurred. That’s the equivalent of an additional 34,045 new households formed over this period.

House prices respond

The shortage of housing supply pitted against record high demand has only exacerbated competition to secure a home.

Parallel to rising rents, Australian house prices have trended upwards too, even after 12 rate rises took the cash rate to 4.1 percent.

CoreLogic’s home value index has recorded a rise in national dwelling prices every month since March, with the robust recovery in house prices shocking most economists. 

But it’s all due to supply challenges, which are set to worsen substantially.

According to the IPA report, over the years to 2028, our stock will suffer a shortfall of 252,800 units. And that’s just apartments. There will be major shortfalls in standalone dwellings too.

So what does this mean for Australians?

It means that housing will become increasingly unachievable over the coming years, especially for young people and those who haven’t already entered the market. And renters will continue to experience rent rises as housing costs increase.

And for those who own properties, they could be about to capitalise off a demand induced property boom, if prices continue to rise alongside increasing population pressures. 

One thing is sure – people need homes and Australia is set to welcome far more people than we can house. 

Hindsight might be a wonderful thing but foresight can be immensely profitable.