Melbourne landlords who relied on the international student market could be out of pocket up to $5000 a year, according to a property investment platform.
Juwai IQI group executive chairman Georg Chmiel said the decline in international student numbers due to pandemic-prompted border closures, had been challenging for Melbourne and Sydney markets, with numbers tipped to decline from 500,000 students in April 2020, to 165,000 in July 2022.
Chmiel said Melbourne’s inner-city had been particularly hard hit.
"Asking prices in the Melbourne city centre are down 8.1 per cent compared to 12 months ago,” he said.
“Rents have plummeted a shocking 20.1 per cent ... that works out to nearly $5000 a year in rent.
“The Melbourne CBD has traditionally housed a large number of international students … [they] made up more than 30 per cent of residents in some Melbourne suburbs.
“Gross rental yields in Melbourne City have dropped from 4.2 per cent a year ago to 3.7 per cent.”
Chmiel said the Sydney market was also exposed to the loss of international students—landlords in the Inner West were asking for rents 8.8 per cent less than a year ago.
“That works out to an annualised loss of more than $2200 per landlord,” he said.
But the Juwai IQI co-founder said he was advising investors to hold on to the depressed assets until international students returned and values picked up.
“This is a good market for investors who are brave enough to buy while prices are down,” Chmiel said.
"Borders are likely to be closed at least until next year, so the situation will probably get worse before it gets better.”
According to the Australian Bureau of Statistics, Australia’s population increased by 136,600 people last year, the slowest rate of growth since 1916.
Net overseas migration was 3300 people in 2020, the lowest intake of net overseas migration since at least March 1982.
Before the Covid-19 pandemic, the international student market netted about $38 billion for the Australian economy, according to the Department of Foreign Affairs and Trade.
But Juwai IQI’s Georg Chmiel said many student housing operators, such as Scape, had pivoted to convert their properties into regular rental apartments.
“You can make a very credible case that Australian student numbers will grow in the post-Covid period to be higher than they were,” he said.
“By 2023 student housing operator Scape will have 10,000 more rooms for rent in Sydney, Melbourne and Brisbane than today.”
Chmiel said despite student accommodation operators’ occupancy rates down to an average of 25 per cent, they had “deep pockets” and a long-term view the market would return.
A Scape 24-storey tower nearing completion at Redfern has been earmarked as one of New South Wales' first quarantine facilities for international students when they returned.
The pilot program would allow 250 students per fortnight to return to NSW.
Before the pandemic there were about 250,000 international students studying in NSW.