Temporary visa rebound points to a chronic summer of pressure on accommodation

Australia’s temporary visa holder numbers crashed by ¾ million through the pandemic, but now they are roaring back.

Temporary entrants return

A rapid rebound in Australia’s temporary visa holders points to chronic pressure on accommodation by the end of the coming summer. There was an unprecedented collapse in the number of temporary entrants visa holders in Australia through the pandemic, falling by more than ¾ million from 2.41 million to 1.64 million.

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Yet paradoxically we’ve ended up with a shortage of rental properties as renters have eschewed living in share houses, and as a potent combination of stimulus payments and lockdowns encouraged a surge in household formation, particularly for first-time renters.

Many residents of high-rise buildings found the COVID restrictions to be highly impractical since there were restrictions on how many residents could use the lift facilities at any one time. And this encouraged a rapid shift away from high-rise living, particularly away from the CBDs and their immediate environs.

It’s true that some of these trends will reverse as COVID restrictions are lifted in full, but the reversal will be more than offset by the huge pent-up demand for both permanent and temporary visas in order to come to Australia.

Summer surge expected

The rebound in temporary entrants visa holders will be very robust in the second half of 2022. By the end of May the number of temporary entrants visa holders had already bounced hard by more than ¼ million to around 1.9 million, and this is likely to ramp up significantly when the summer months come around.

Figure 1 – Temporary entrants visa holders

To date there has been a strong recovery in the number of visas for international students, but visitor visas remain well down on their normal levels.

Typically, the student visa numbers drop away at the end of term times towards the end of the calendar year, but we also expect to see a stronger ramp up in the number of visitors to Australia in the warmer summer months of the year.

Figure 2 – Temporary visas – forecast

The summer season tends to be a strong drawcard for permanent migrants to Australia too, with student numbers also resurgent after the turn of the new year. It wouldn’t be uncommon for the resident population to increase by more than 100,000 in the first quarter of the calendar year.

We believe there may be some short-term respite for property market pressures, given that many Australians are currently heading overseas for the European summer, with most residents having been denied that opportunity for two years. However, we believe that chronic rental market pressures will become increasingly evident, especially through the traditionally busy January to March period in the new year.

Short-stay rentals distorting markets

The dynamics of the rental market have changed through the pandemic, and the pressures on accommodation may manifest themselves differently over the coming nine months. We’re likely to see a recovery in the use of share houses again, and CBD apartments are gradually refilling after the very high rates of vacancy we saw through the pandemic.

We’re likely to see a recovery in the use of share houses again, and CBD apartments are gradually refilling after the very high rates of vacancy we saw through the pandemic.

Short-term visitors will put pressure on the capacity of hotels, some of which have been struggling with staff and skills shortages.

A different factor in the residential rental markets of today is the new proliferation of Airbnb and other short-stay rentals, which have played a significant role in depleting the available rental stock. While numbers are fluid, it is estimated that there are more than 100,000 short-stay rental properties in Australia, overwhelmingly comprising entire homes rather than individual rooms.

The impacts vary around the country due to differing caps and restrictions. But the net effect is that more landlords offering short-stay options equates to less rental stock being made available for the wider residential market.”

Overall, the coming summer months are likely to see a surge in travel itineraries bound for Australia from both temporary visitors and permanent migrants, following a period when rental vacancies have already slumped to 16-year lows.

There’s likely to be chronic pressure to absorb the surge in demand by early 2023, especially given that most new arrivals into Australia tend to be renters.

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