Demand for student rental accommodation is driving up the premium for inner-city property in Sydney, says the head of financial stability at the Reserve Bank of Australia.
Head of financial stability at the RBA Dr Luci Ellis told an urban planning seminar at Sydney University on Monday night that pent-up demand in Sydney and other urban centres for more medium- and high-density living had driven prices for all types of inner-city properties well above the national median.
“Prices have risen faster than consumer prices, but they have not risen materially faster than household incomes," she said.
Dr Ellis said building approvals are running at an “extraordinary” annual rate of 200,000, driven by low interest rates and demand from very strong population growth.
She added that population growth was coming mainly from international students, given tertiary education is one of Australia’s biggest exports after coal and iron ore.
“It’s little appreciated just how concentrated that population growth has become in students and former students,” Dr Ellis said.
“Where do students want to live? Well it’s not big family homes on the fringe, it’s apartments in the inner areas near the universities.
“It’s all very well to build more housing to accommodate the population, but it has to be broadly comparable with where people want to live.
“Building housing where people don’t want to live is counterproductive,” she added.
Dr Ellis said the consequence of this demand is that the cost of living closer to the city has increased, more so than in the past.
Building new cities could be a solution, she said.
“Since when have we built new towns in Australia? Not since Canberra.
“We don’t do that any more," she said. "There’s plenty of good universities outside the major centres but they don’t keep their population in the way that university towns in the US do.”