The Department of Education released data on the number of international students studying in Australia.
A record 1.095 million international students were enrolled in Australia at the end of December 2024. This was up around 150,000 from the pre-COVID peak in 2019 and around 500,000 higher than a decade ago.
International student commencements also hit a record high of 572,000 in 2024, up more than 60,000 from the pre-COVID 2019 peak.
Last week, one of the largest pieces of propaganda was published by an Australian university.
Researchers from the University of South Australia, who have a vested interest in promoting international education, argue that there is no link between the record surge in international students and the cost of rent. That is, the fundamental law of demand and supply does not apply to the rental market.
The study also claimed that international students have been “thrown under the bus” and unfairly blamed for the rental crisis.
The study’s conclusion is pure gobbledygook:
The negative relationship between rental cost and rental vacancy rate is plausible, meaning that the rental cost may rise with the decrease of rental vacancy rate. In other words, inadequate housing supply strains the rental market and raises the rental cost…
At the national or capital city level, over time or pre-/post COVID — rental inflation and vacancy rate explained a considerable proportion of the variance in rental cost. By accounting for their contributions, our analysis identified and interpreted the unique contribution of international student number to rental cost, above and beyond the variances explained by rental inflation and vacancy rate.
Our findings demonstrate that international students do not contribute to the rise of rental costs at the national level; neither do they contribute to the rental cost in capital cities post-COVID.
Their impact on the rising rental costs in capital cities over time and pre-COVID is marginal, if any, when taking into account rental inflation and vacancy rate.
The reality is that the surge in international students added significantly to rental demand, lowering the vacancy rate and increasing rental inflation.
The following chart plots the change in net overseas migration (driven by international students) and CPI rental growth.
When net overseas migration turned negative at the beginning of the pandemic, CPI rents fell. When net migration surged to record levels, CPI rents soared.
In a similar vein, the following chart from Justin Fabo from Antipodean Macro plots the surge in the number of temporary visa holders.
Now compare the above to the following chart from Fabo showing SQM’s asking rent series:
What a coincidence: when the number of temporary visa holders fell, so did asking rents. When temporary visa numbers soared, so did asking rents.
The following chart from Fabo is the money shot. It shows the clear relationship between housing demand/supply and rents.
Increasing immigration through international students in a market with limited supply was disastrous for Australian tenants.
Tellingly, a fact sheet released by the Department of Education six months ago conservatively estimated that international students utilised 7% of Australia’s private rental accommodation, or one in every 14 rental homes.
The Department of Education also explained how the surge in international students has likely driven up Australia’s rents:
“The Reserve Bank of Australia estimated that a 1% increase in dwelling stock results in the cost of rentals decreasing by 2.5%”.
“A 1% reduction in the demand for private rental properties has an equivalent impact as a 1% increase in dwelling stock and would result in a decrease of rental prices across the market, especially in inner-cities”…
“Rents across Australia rose during the COVID-19 pandemic, but data from SQM research shows that rental prices for units in inner-city locations around most major university campuses dropped significantly from June 2019 to June 2021 when international student numbers were low and rose sharply in the 12 months following the return of students”.
To deny that international students impact the rental market is to deny the fundamental laws of supply and demand.
As a thought experiment: if the 600,000 or so student visa holders in Australia were to suddenly leave, vacating rental properties, would rents:
- Continue rising as these rental homes are left vacant; or
- Fall because renters now have more options?
The answer is obvious and irrefutable. International students boost rental demand and, therefore, put upward pressure on rents.
