‘Trump Effect’ on Australian apartments?

May 11, 2017 / By  

With media reports of looming supply issues and a peaking market, will the newly coined ‘Trump Effect’ help alleviate any potential downside risk to the Australian apartment market?

The recent inauguration of Donald Trump as the 45th President of the United States of America has created another layer of uncertainty in an already turbulent geo-political environment. One of the key policy issues that will have global implications is President Trump’s position on immigration and border controls. With reports out of America stating that nearly 40 per cent of universities are seeing a decrease in demand from foreign students wanting to study in America[1], Australia (and its residential market) are poised to directly benefit from the “Trump Effect”.

The number of foreign students in Australia increased 10.3 per cent year-on-year at the start of 2017. Higher education saw the largest influx of students, with the sector outperforming others at 13.3 per cent growth[2].

The attractiveness of Australia’s education system

With a reputation for a high quality, English-speaking education system, Australia is tipped to benefit from uncertainty surrounding US immigration policy. Australia already enjoys above average growth in student numbers from China, India and Latin America, and the recent temporary visa ban by the US – on a small number of Muslim-majority countries – may boost student numbers from the Middle East.

A large number of major education institutions, such as universities, are located within or are accessible from inner-city locations. Many of these inner-city locations boast high levels of amenity and superior access to public transport; appealing to both domestic and foreign students.

Growing need for student accommodation

The emergence of the newly institutionalised student accommodation sector in Australia is seeking to take advantage of the booming education sector. Construction of purpose built student accommodation facilities is taking place across Australia within these well-serviced locations in Sydney, Melbourne and Brisbane.

At the same time, there has been a surge of apartment construction across the eastern seaboard capitals. Approximately 45,800 residential apartments are currently under construction within the inner suburbs of Sydney, Melbourne and Brisbane, and concerns have been raised about who will live in all of these newly completed inner-city apartments.

Given the growth of foreign students choosing to study in Australia, it is highly likely that some students will choose to live in an apartment instead of, or after having lived in purpose built student accommodation facilities. This could provide a much-needed boost to tenant demand for inner-city apartment investors.

Increasing uncertainty surrounding potential policy changes to be implemented by the Trump administration, coupled with increased nationalist views across Europe, provide Australia with the opportunity to benefit from increased demand for its education services.

Despite competition from the student accommodation sector, Australian inner-city apartment markets are well positioned to take advantage of any flow-on effects stemming from increased foreign students as a result of the ‘”Trump Effect”.

[2] Australian Trade and Investment Commission

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