24-07-2025
RBA finds foreign students add to Australia's housing demand
[SYDNEY] International students in Australia exert more pressure on demand in the economy, including in the housing market, rather than adding to supply, according to a new Reserve Bank of Australia (RBA) analysis.
'In the housing market, supply is constrained in the near term, so changes in the number of international students in Australia could impact market outcomes, in the same way changes in the population more broadly could,' the RBA's Madeleine McCowage, Harry Stinson and Matthew Fink said in a research paper published on Thursday (Jul 24).
The authors pointed out that higher demand for housing could also spur more dwelling investment over time. One area where higher numbers have already generated a supply response is in purpose-built student accommodation, with rapid growth in building approvals in recent years, the analysis showed.
Traditionally, immigration is estimated to add to both demand and supply reasonably evenly, suggesting they cancel each other out in terms of economic impact.
The research comes as Australia's centre-left government has tightened visa rules for foreign students, in response to a once-in-a-generation housing affordability crisis. In the aftermath of Covid, international students accounted for around half of Australia's net overseas migration, with their numbers soaring to 560,000 by the end of 2023, from just under 300,000 in 2022.
The RBA's analysis showed that student visa grants have fallen since mid-2023, though their numbers onshore remain near record highs with arrivals exceeding departures.
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Spending by overseas students as they set up a home in a new country was also an important contributor to growth in consumer demand and prices following the pandemic, according to McCowage, Stinson and Fink.
Education is currently Australia's fourth-largest category of exports, worth approximately A$50 billion (S$42 billion) in 2023 to 2024.
The Bank of Canada, in 2024, came to a similar conclusion in its analysis for the effect of 'newcomers' on the Canadian economy. The central bank found that newcomers affect demand sooner than supply and that this unevenness contributes to inflationary pressures in some sectors, in particular, on house prices and rents.
McCowage and Stinson are from the RBA's Economic Analysis Department and Fink is from Economic Research Department. BLOOMBERG
