Fewer long term visitors likely to result in less rental demand for student accommodation

Overseas arrival numbers to Australia have continued to decrease, continuing the downwards trend in the rate of population growth that first became apparent in early 2009.  In the first quarter of 2009, total permanent and long term arrival numbers averaged about 71,000 movements/month.  The October figures released this week show the monthly arrival figure has fallen to just 42,910 – a fall of around 40% from the recent peak.

Overseas arrivals are an important component of housing demand, be it for rental accommodation or purchasing a home.  To put it simply, more resident’s means more shelter required to house the growing population.

The long term and permanent arrival figures can be further divided into three separate groups:  permanent settlers, returning residents and long term visitors (ie visitors intending to stay in Australia for more than one year).  By far, long term visitors account for the largest proportion of all long term and permanent arrivals.  Over the year to October 2010 this group accounted for 57% of the overall total.   Long term visitors are also the group that is recording the sharpest declines, with arrivals down 52% between the first quarter of 2009 and October 2010.

Overseas arrivals SMALL

The drop in long term visitor numbers, a large component of which would be overseas students, are more than likely to impact on rental demand – particularly rental demand for accommodation typically occupied by foreign students.  Specific areas of the Melbourne and Brisbane inner city apartment market could potentially be the most affected due to historically high demand for foreign students in these areas.

Our forecast for rental growth over the coming year certainly remains optimistic; broadly speaking rental demand is likely to remain strong and drive weekly rents upwards.  However, specific segments of the market that are reliant of long term visitors are likely to be adversely affected by the long term visitor slowdown.

About Tim Lawless

Tim heads up the RP Data research and analytics team, analysing real estate markets, demographics and economic trends across Australia

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