Rental Market Pins Hopes on Travel Bubbles

There are calls for more international travel routes to reopen as the New Zealand bubble is lauded as the starting point for a return to normal for the inner-city rental market.

The federal government is already looking at Singapore as the next country on its travel bubble list, followed by Japan, Vietnam and South Korea.

This could also open travel for Australia’s largest international student population, that in China, as Singapore and Hong Kong will open their borders to that nation on May 26.

Qantas is also pushing for more Pacific Islands to be added to Australia's list.

Any increase in migration could boost the rental market, which has been significantly affected in Sydney and Melbourne.Both cities are lagging behind the rest of the country for rental growth, according to Corelogic.

Rain & Horne has reported that weekly rents for inner Melbourne suburbs, close to the University of Melbourne and RMIT, are down by as much as 30 per cent since the flow of international students stopped.

Pre-Covid population by country of birth in Australia

^Source: ABS at 30 June 2020

Meanwhile, Australia’s largest student accommodation provider Scape has applied to temporarily repurpose its existing assets for the use of essential workers and travellers.

But the bid for international students, migrants and travellers is far from lost.

NSW recently put out a tender to begin a new international student accommodation quarantine program based in the Sydney CBD or its fringe.

“International education is our second largest export, generating $14.6 billion in exports annually before the pandemic and supporting nearly 100,000 jobs in NSW,” the expression of interest eTender read.

“We estimate in 2021 we have already lost a third of our international student base.”

The tender by NSW Treasury, which closed mid-April, also urged providers who did not meet the mandatory criteria to submit an application through the unsolicited proposals scheme.

Raine & Horne national manager Maria Milillo said the introduction of the New Zealand travel bubble and future bubbles was exciting news for landlords.

“It’s still a day-by-day proposition for travel to New Zealand, however, the bubble sets the stage for more robust inner-city rental markets longer term, particularly as international students begin to return,” Milillo said.

“There are particular rental pockets around the country that the closure of international borders has impacted severely.

“From the thousands of young travellers typically spending a gap year or two in sunny Bondi Beach to the suburbs close to universities with abundant student accommodation, border closures have caused vacancy rates to rise and lower returns for some investors.”

Pre-Covid international student population in Australia

^Source: Department of Education, Jan to Dec 2020 - 686,104 students in total

During an interview earlier this month, federal tourism minister Dan Tehan said they were taking medical advice and wanted to open more travel bubbles.

“Obviously Singapore would be a very good next step to build on what we have already achieved with New Zealand, but we'll take our time, we'll work that through,” Tehan said.

“Then we could look at other countries such as Japan, such as Vietnam, which has also done a very good job at dealing with Covid-19, South Korea—there are many options, so we'll continue to work through those.”