Visa extensions for international students put strain on rental market

I recently wrote about the key population statistics that impact housing, outlining how government attempts to slow net overseas migration have so far had only limited success.

This has exacerbated pressure on housing, particularly the rental market, at a time when Australia already has an estimated undersupply of between 200,000 to 300,000 homes for our existing population.

More evidence is now emerging of a future migration blowout involving international students which will place yet more pressure on housing, particularly in big cities like Sydney and Melbourne, and keep upward pressure on rents.

The details

In the financial year that ended on the 30th of June, 2023, Australia experienced something it had never seen before—a huge population surge, which saw 624,100 new people call Australia home.

The Australian Bureau of Statistics says 106,100 of these new residents came from “annual natural increase”—that’s the sum of the number of people who have died subtracted from the number of babies born in a particular year.

However, the overwhelming population boost came from net overseas migration or NOM.

That’s the difference between the number of international arrivals staying longer than a year in Australia and the number of long-term and permanent departures.

The ABS says this number was 518,100, while the Federal Treasury says the figure was slightly higher, listing it as 528,000 in this year’s budget papers.

Under mounting pressure to address acute shortages in the housing market, which has sent rents and home prices soaring despite the highest interest rates in 13 years and a cost of living crisis, the Albanese government pledged earlier this year to curb overseas migration, including cutting the number of international students.

However, as I outlined previously, the government’s predicted NOM figure for the 2023-24 financial year has already blown out.

The budget in May forecast NOM would be 395,000 for the 2023-24 financial year, but the latest release from the ABS shows the total for the three quarters to March was already 388,000.

Treasurer Jim Chalmers recently admitted the budget forecasts were wrong.

“When it comes to arrivals, we’re more or less tracking as we expected, but when it comes to departures, that’s been a big difference,” he recently told Sky News.

“That’s why there is likely to be a revision of those net overseas migration forecasts because of those fewer departures.”

There’s now evidence as to why there have been “fewer departures”.

International student “shock”

Around 50% of Australia’s annual migration intake is made up of international students.

While universities and education providers try to argue this cohort has very little impact on housing, recent Federal Education Department figures estimate that 7% of rental properties in Australia are occupied by international students.

Amid loud protests from the international education sector, the Albanese government has started winding back the number of student visas it issues.

The Australian Financial Review’s Education Editor, Julie Hare, says 55,000 new student visas were issued in July and August this year, compared with 68,000 in the same period last year.

However, she also points out that “official figures show the number of international students has reached its highest level ever – 679,293 at the end of August.”

Despite the government’s pledges to cut student visas and a crackdown on “dodgy” education providers offering bogus courses for “non-genuine” students, Julie Hare says the number of student, graduate, bridging and skilled migrant visas rose by 200,000 to 1.41 million over the 12 months to the end of August 2024.

“The figures suggest that international students are switching to other types of visas or a second student visa, making it difficult for the government to reach its net migration forecasts of 260,000 this financial year (2024-25),” she says.

“In short, rejected student visa holders are using bridging visas to extend their stay in Australia,” says Leith Van Onselen, the Chief Economist at the MB Fund and MB Super and a co-founder of the MacroBusiness website.

“And this is undermining the federal government’s war on dodgy student visas by clogging the appeals process.”

These events have helped lead to the “fewer departures” Treasurer Jim Chalmers referred to.

The man who managed Australia’s migration program between 1995 and 2007 says he currently expects this financial year’s net overseas migration figure to blow out to between 325,000 and 350,000.

Former Deputy Immigration Department Secretary Abul Rizvi recently completed a PhD in population and immigration policy and has penned a new book about Australia’s migration program called “Population Shock”.

“To get to 260,000 in the current year is just not possible unless the government substantially changes policy,” Dr. Rizvi told the AFR.

“Everything tells me the Education Minister, Jason Clare, wants to loosen policy, not tighten it.”

In the real world…

“Temporary visas must be temporary, and holders must be made to return home after their visas have expired, “ says Leith Van Onselen, who’s been a staunch critic of Australia’s international student policies.

However, with education a key export and overseas student fees propping up underfunded universities, I wouldn’t hold your breath that the number of international students will plummet.

It’s clear some are gaming the system and staying in Australia longer than the Federal government had planned, with many trying to find pathways to stay in Australia permanently.

But on the other hand, while they are here, students are spending and earning money, helping to prop up the economy.

Without the recent surge in temporary migrants Australia would currently be in a recession and a lot more people would be out of work.

So, expect the Federal government’s net overseas migration targets for the last financial year and 2024-25 to be blown out of the water.

As a consequence, expect to see no let-up in the pressure on the housing market.