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Will International Borders Reopening Revive Inner-City Rents?

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Almost two years later, the border will finally reopen on February 21st. But will the pandemic-stricken real estate market in the city center return to growth?

Once considered the country’s most desired rental stock, the urban market is lagging behind the recent real estate boom.

Analyze the impact of border closures on the rental market and discuss potential rebounds.

Temporary migration to Australia basically stopped in early 2020

One of Australia’s early policy responses to the COVID-19 pandemic was to close the border.

On March 20, 2020, 10 days after Australia recorded 100, the border was closed to non-residents.th case. Residents who returned to Japan had to be quarantined at a state-owned hotel facility from March 27th.

Not surprisingly, this almost complete closure had a dramatic impact on Australia’s overseas expansion and the Australian economy.

The temporary suspension of migration had a particularly significant impact on the two sectors of tourism and education.

For the higher education sector, this was a big change. International students make up just over a quarter of all higher education students, as shown by data from the Ministry of Education, Skills and Employment.

This is equivalent to the registration of more than 400,000 international students and the total arrival of more than 800,000 in Australia in 2019. [1]

It all changed in early 2020.

Recent immigrants live disproportionately in the city center

Border closures have also affected the Australian rental market.

Many of Australia’s major universities are close to the city center and so many foreign students choose to live in the central suburbs near the campus.

This is clearly visible in the graph below.

According to 2016 census data, recent migrants are more than three times more likely to live in the city center than in the suburbs and rural areas of metropolitan areas. [2]

Recent immigrants make up 3.5% of the population in the inner suburbs, but only 1.1% in the outer suburbs and 0.8% in the region.

Many of these city centers have recorded rent declines during a pandemic.

The main feature of a pandemic is the change in where the renter wants to live and the amount they are willing to pay.

This reassessment shows that rents in central Tokyo are declining in some areas. Suburbs When region It has grown rapidly.

In the city center, temporary immigration, especially the loss of students, is part of the story. With far fewer students, rental demand in the city center is declining.

This can be seen in the graph below.

The area on the right side of the graph is where immigrants are likely to live. Broadly speaking, these suburbs have slower or lower median rents than the areas on the left side of the chart where recent immigrants are unlikely to live.

In central Melbourne (bottom right of the graph), the median advertising rent has fallen almost. quarter Since the pandemic started. It was also part of Australia, where immigrants are most concentrated. In the 2016 census, more than one in ten people living in downtown Melbourne were recent immigrants.

Similar results were seen in downtown Sydney, where median advertising rents fell 7.7% over the same period.

The loss of international students is part of the reason for the decline in rental demand in the city center and part of the reason for the slow or lower median rents in these regions.

Rents in central Melbourne have fallen almost a quarter since the pandemic.Photo: Getty

That may be part of the reason we saw Less rent available in January This year is better than usual.

January Usually the busiest month In the Australian rental market, however, this year’s activity has been more restrained.

January is usually the time when international students arrive to start their academic career. These students have leases that expire at the beginning of the year and bring their list back to the market. Few international students arrived in January 2021, so the cancellation did not occur in January 2022.

The reopening of the border will regain some demand for these unprofitable rental markets.

Once the borders are reopened and temporary migration is reopened, these city centers will be sought after again.

But you won’t see a complete reversal. Not just migration This is causing slumps in rents in these city centers. These are areas that have become less attractive to renters for a myriad of reasons.

The suburbs of the city center are traditionally Ordered a premium Because it’s close to CBD and public transport. However, because many people work from home, the value of that factor is low.

Similarly, people are now Have more space Or, I live closer to the beach than before the pandemic. It also reduces the attractiveness of the more densely populated city center.

These changes are not immediately irreversible just because the boundaries have been reopened.

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