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How will the return of international travel impact Australian property?

by | Nov 18, 2021 | Business, Property Investment

After being closed for more than a year, Australia is finally opening up its international border. This is fantastic news for our tourism industry and the economy as a whole. But how will the return of international travel affect the property market? 

There are likely to be four big impacts. 

  1. Tourists will boost short-term accommodation rentals

When the international border closed in March 2020, it crushed Australia’s tourism industry. Inbound tourist arrivals dropped from 1.2 million in January 2020 to 14,000 in January 2021, according to the Australian Bureau of Statistics. The return of international visitors is likely to give the holiday accommodation sector a much-needed boost. This is good news for property investors who offer short-term rentals.  

  1. The demand for student accommodation will increase

Thanks to our world-class universities, Australia attracts many international students. But the travel ban severely impacted this market. New student enrolments in 2020 were 21.9% lower than the previous year, according to Tourism Research Australia. As students return to our shores, they’ll need accommodation, especially in the major capital cities.  

  1. Overseas demand may rise

International investors and ex-pats continued buying Australian properties while the international border was closed, according to Real Estate Institute of Australia president Adrian Kelly. However, he said the reopening of the border would lead to more sales activity. “This will change things because the majority of people prefer to touch and feel a property before they spend their money,” he told MPA. 

  1. Domestic demand may fall

Households have significantly increased their savings since the pandemic started. In the December 2019 quarter (the last full quarter before the pandemic started), households saved 3.5% of their income, according to the Australian Bureau of Statistics. By the September 2020 quarter, that had skyrocketed to 18.7%. Reserve Bank assistant governor Luci Ellis recently told the Inquiry on Housing Affordability and Supply in Australia that part of the reason property prices have boomed in the past year is because “cashed up” households have used their savings to bid up property prices. Now that the international border has reopened, some may choose to spend their savings on a long-awaited holiday instead. This may cause a dip in buying activity, and therefore put downwards pressure on price growth. 

That said, the right investor mindset is to block out the short-term news cycle. That’s because, regardless of what’s happening in the economy and the property market, the key to succeeding with property investment is to buy quality assets and hold them for the long term.