Senior Australian data analyst Karen Dellow recently pointed out that international students are not the main cause of Australia's rental crisis. The government's policy of trying to reduce rents by limiting the number of overseas students may backfire and even pose a threat to the economy, universities and local businesses.
According to research by the Student Accommodation Association (SAC), international students make up only 61% of all tenants nationwide, concentrated in capital cities. Even so, the Australian government plans to cap international student enrolments at 270,000 from January 2025 in an attempt to ease pressure on the rental market.
Data reveals: International students have limited impact on the rental market
SAC research shows that international students rent 7% in Victoria, 6% in New South Wales and 6% in Western Australia. Of these, 39% of international students live in purpose-built student accommodation, further reducing their impact on the general rental market.
Between 2015 and 2024, the number of beds in these purpose-built student accommodation facilities, primarily located in capital cities, increased by 74%. These facilities effectively mitigate market pressures and avoid rental fluctuations caused by fluctuating student populations.
Dellow's analysis indicates that even if the government implements enrollment caps, the impact of international students on the rental market will only decline slightly. By 2025, the international student share of the rental market will decrease by 0.2%, and further decline from 5.4% to 4.8% in 2026. She emphasizes that this change will primarily affect areas near universities and will have a limited impact on overall vacancy rates.
The root causes of the rental crisis
Dellow believes Australia's rental crisis is caused by a shortage of housing, not the impact of international students. She points to a combination of factors driving up rents:
- Insufficient supply of new housingBuilding project delays, a shortage of skilled workers and rising building material costs have resulted in construction projects taking 50% longer today than they did four years ago.
- Investors exit the market: The decline in demand for rental properties in inner-city areas during the epidemic and the increase in land tax in Melbourne have caused some investors to withdraw from the market.
- Population growth: Population growth, including natural increase and immigration, further exacerbates housing demand, while the aging population requires longer-term housing.
- The proportion of single-person households has increased: The growing number of single-person households has reduced the overall number of available homes.
- Cost of living pressures: High interest rates and economic pressures are affecting people's ability to buy or rent a home.
- The rise of the short-term rental market: Investors are turning to the short-term rental market in search of higher returns, further reducing the supply of long-term rental properties.
Taking all these factors into account, the national rental vacancy rate has remained low since the outbreak of the epidemic. As of September 2024, the vacancy rate was only 1.2%.
Limiting potential financial losses for international students
International education is Australia's fourth-largest export, contributing A$48 billion to GDP and supporting 335,000 jobs. Dellow said that if student enrolment limits were implemented, it would result in an estimated A$4.1 billion reduction in GDP and the loss of 22,000 jobs. In addition, Australian universities would see a A$641 billion reduction in revenue.
Solution: More housing, not fewer students
Dellow stressed that the key to solving the rental crisis lies in increasing housing supply rather than limiting the number of international students. She suggested:
- Accelerate housing construction and remove obstacles to construction;
- Providing incentives for investment properties to increase market supply;
- Reduce taxes and zoning restrictions on building student accommodation to attract more large-scale investment.
She believes that rather than reducing the number of international students, it is better to increase the supply of rental housing to alleviate the crisis and retain the economic benefits brought by international students.
Chinese