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The Not So Obvious Factors Driving Housing Demand

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A sound education is a huge driver for parents and completing a tertiary level education provides children with a great advantage. The current face of that advantage is a western education.

In Australia, we want our children to be successful and support them doing well.  However, in Asia this brings out the Tiger Mums. They are fighting for the quality of their children’s education.  Is it because what their children achieve is directly linked to the quality of their retirement both in income and status?

The number of international students that came to Australia for education in the first seven months of this year was 685,000.  This was a 15% increase, or 82,000 more students than last year.  That is an extraordinary increase.   Also of interest is that over half of them headed off to university and the rest presumably to other secondary or tertiary schooling.

This sector is growing rapidly.  It has impact on the property sector through student accommodation, general rental property and the purchase of dwellings.  Is there enough accommodation in the areas that are needed?

Most of the students are attending the city campuses of the big universities and regional universities.  When we look at the surrounding suburbs there are 21 suburbs where over 35% of the residents are not Australian citizens.  The two outstanding figures are in Melbourne CBD over 65% and in Sydney’s Haymarket over 54% of residents are not Australian citizens.

What is driving the growth of this market?

The ABS calculated that international students contributed A$28B to the Australian economy in 2016-17.   This figure presumably includes fees to Universities, and living expenses while they are here.  To put this in perspective we can compare this with international in bound tourism that contributed $47.5B in 2015-16 when the number of tourists was 7.4Million people[1].

For the financial year 2016-17 our inbound tourists numbered 8.7 million[2].  This was up by 17% which, assuming the same spend basis, would make the sector contributing $55.8B to the economy.

Our international student sector is worth nearly half the value of our international inbound tourist sector and yet doesn’t seem to be getting the same attention or support.  How do we make sure these young people have a great time while they are here?  How do we manage our reputation as a great place to study and a safe place to live so they want to stay, come again or bring their families to visit?

When we examine how young people choose where to study overseas it can be confusing.  There are several websites dedicated to ranking universities.  Though others also rank countries and locations.  Students appear to be engaging in educational tourism with the Australian cities, Sydney and Melbourne high on the list.

The Chinese living essentials are for educational quality, personal safety, clean air, food safety and reasonable cost of living[3].  Compared to Beijing, Sydney and Melbourne may well be considered to have affordable living costs.

The ‘Top Universities’ website markets international cities based on their ability to “stimulate your brain cells, social sensors, taste buds, cultural connoisseurship and adventurous impulses’.  They rank them from Paris as number 1, then Melbourne, London, Sydney, Hong Kong, Boston, Tokyo, Montreal, Toronto and Seoul at number 10.

The United States is the first preference for the quality of education and life style, then the UK and then Australia.  Given we have two major cities containing 65% of our international students, by city, we may be ranked higher.

A recent Credit Suisse report found about 25 per cent of the value of new property supply in NSW, 17 per cent in Victoria and 8 per cent in Queensland, has been bought this year by foreigners, 90 per cent of whom are Chinese.  This was deduced by using stamp duty payments[4].  How many of these are for students is more difficult to follow.

There is no doubt that this will have a continuing impact on the property market in Australia as our reputation for a sound education grows.

[1] https://en.wikipedia.org/wiki/Tourism_in_Australia
[2] http://www.tourism.australia.com/en/markets-and-research/tourism-statistics/international-visitor-arrivals.html
[3] https://www.topuniversities.com/blog/15-best-places-study-abroad-2015
[4] http://www.abc.net.au/news/2017-10-11/foreign-buyers-not-deterred-by-rising-stamp-duty/9038014

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