The number of overseas students in NZ is starting to decline rapidly - shoebox apartment market a likely casualty

Property

The number of overseas students in this country in August was down 17% year-on-year and the rate of decline is increasing

21st Sep 20, 2:40pm by Greg Ninness

The number of overseas students in New Zealand is starting to decline significantly, according to the latest figures from the Ministry of Business, Innovation and Employment (MBIE).

MBIE tracks the number of people in this country each month on student, work and residence visas. Those on student visas have been steadily declining since February and the rate of decline is increasing.

The number of people in NZ on work and residence visas have been more stable.

The number of overseas students in this country had also been relatively stable for the last four years. Numbers generally peak in February for the start of the academic year, then remain fairly flat apart from a slight dip in June, before falling sharply in November and December and then rising again in the New Year.

The numbers were following that pattern until February, but instead of remaining stable have declined every month since.

At first the decline was only slight, dropping from 82,860 in February to 81,915 in March (-1.1%). But the rate of decline has been increasing and in August the number of overseas students in NZ fell to 70,578, down 5.3% compared to July.

That means there were 14,541 fewer people in this country on student visas in August this year than there were in August last year, a decline of 17%. That rate of decline will likely speed up over the coming months as the academic year nears its end.

The drop in overseas student numbers is likely the main reason that Auckland’s CBD apartment market has been hammered this year. While the overall housing market has remained surprisingly robust post the Level 4 COVID lockdown, prices of the smaller CBD apartments in Auckland sometimes referred to as shoeboxes, have gone against the trend and taken a tumble.

Such apartments are popular with overseas students and are generally owned by investors.

Although investors remain active in the shoebox market, they have been increasingly concerned about the prospect of falling rents. And that has been pushing down the prices they have been prepared to pay.

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55 Comments

by rastus1 | 21st Sep 20, 2:47pm 1600656427

Good. Lest hope it spreads across all people importing businesses and we can look forward to having a functioning city instead of a grid locked mess - which was rapidly being exported to the regions.

by FamilyGuy | 22nd Sep 20, 9:41am 1600724464

It is hard to let go cheap and unskilled labour from overseas. NZ governments work for businesses, not for people.

by SmoKey | 22nd Sep 20, 12:30pm 1600734654

Turn them all into Quarantine Facilities. Sorted.

by Officebound | 21st Sep 20, 2:49pm 1600656593

Speaking to a friend who is a PM in the shoebox end of the market, tells me he's got 60% vacancy in his books, which represent a pretty good cross section of the market.

Apparently reducing the price isn't doing much, and the owners all in various states of comsidering their portfolio.

Interesting times!

by EarlyMillenial | 21st Sep 20, 8:09pm 1600675763

Pretty sure reducing the price does work. Just that a tepid 5% haircut won't cut it. Tell your mate to go early and hard and offer 40-50% discount to comparable rentals, and then watch what happens

by Fritz | 21st Sep 20, 3:00pm 1600657240

The large number of Auckland CBD apartment vacancies is probably increasing the median rent figures for 1 and 2 bedroom dwellings in Auckland, therefore giving a distorted picture

by Basil brush | 21st Sep 20, 5:44pm 1600667093

I don't follow the logic. Wouldn't increased vacancies be putting downward pressure on rents?

by Lanthanide | 21st Sep 20, 8:03pm 1600675381

When the bottom end of the market drops away and the rest of the market is unaffected, the median and mean rents (of properties that are rented) will increase to reflect the absence of the bottom.

by Independent_Observer | 21st Sep 20, 3:00pm 1600657249

So just confirming - no new international students have been arriving this year for semester 2 studies onwards due COVID?

by Advisor | 21st Sep 20, 3:41pm 1600659706

I don't think there are new student arrivals in NZ since the border closure back in March.

As per INZ's figures, 2,055 student visas were issued between April and August this year. Most of these applicants should be those already in NZ on other temporary visas (holidaymaker, work, tourist, family, etc.).

So, to answer your question, no new international students have been arriving for semester 2.

by Independent_Observer | 21st Sep 20, 4:41pm 1600663300

Thanks Advisor

by Greg Ninness | 21st Sep 20, 4:22pm 1600662121

There has been a handful each month but the numbers are tiny. In July there were 48 arrivals on student visas compared to more than 20,000 in July last year.

by Independent_Observer | 21st Sep 20, 4:40pm 1600663241

Ok - thanks Greg. I wonder what special provisions are provided for such a small minority to arrive and study?

by nigelh | 21st Sep 20, 3:09pm 1600657741

Perhaps the govt should buy or rent the apartments and let them to those getting accommodation supplements to stay in motels. Oh wait. They'll only be empty for another 6 months or so before the students and the other immigration flood gates are opened again.

by Independent_Observer | 21st Sep 20, 3:28pm 1600658927

Try 2-3 years until we either have a vaccine or some other method of avoiding mass COVID infections.

by NZChinese | 21st Sep 20, 6:05pm 1600668354

In 2-3 years time, COVID may become a genuinely mild respiratory disease. We don't need to worry about it too much even without a vaccine.

by Lanthanide | 21st Sep 20, 8:05pm 1600675502

Vaccines are going to be rolled out on a large scale Q1 next year. It won't take 2-3 years for us to open our borders back up.

by Advisor | 21st Sep 20, 9:52pm 1600681949

At this stage, the Covax arrangement that we along with 72 other countries have committed to doesn’t cover immunisation for more than 50% of a country’s population.

Our major student source countries have billions of people that their governments will have to immunise. The complex logistics of mass manufacturing and distributing vaccines to hundreds of millions of people is likely to take more than 12 months, best case, from the time a working prototype is available. Then there is lack of proper data, efficiency and transparency within the public health system of these countries to ensure a smooth mass-immunisation process.

Until then, expensive testing and isolation will still hinder movement of people between NZ and certain countries.

by linklater01 | 22nd Sep 20, 11:14am 1600730067

Lanthanide,

You simply don't know that. It MAY happen that soon and it MAY be an effective long-term vaccine, or it MAY not.

Of course, I hope you are proved right, but I am more doubtful.

by Ron Pol | 22nd Sep 20, 3:05pm 1600743958

With so much uncritical reporting it's hard to get a good handle on this. Some scientists say history suggests we may never get a vaccine or it could be years away, and may require regular shots, yet hardly ever feature in news. Massive $ gone into it so it may be sooner. Hopefully. But the massive skew to 'good news nearly there' reporting, without asking a single pertinent question, doesn't make it so.

by waymad | 23rd Sep 20, 3:52pm 1600833147

Yes, it's 'free beer tomorrow' shifted sideways into 'effective vaccine Soon'.....

by rastus1 | 21st Sep 20, 4:26pm 1600662382

They don't get accom supps to stay in motels. The govt pays $1,500 per week with no charge to the beneficiary. i.e it's free, including power, phone, sky bedding and so on. And if you have too many kids, you get two units... yes $3k plus per week for some of em...plus the actual benefit of another $600 plus.

NZ has become a county with mass corruption and fraud absolutely everywhere you look.

by Hook | 21st Sep 20, 6:10pm 1600668621

"NZ has become a county with mass corruption and fraud absolutely everywhere you look." I think you meant mass Govt incompetence and mass private denial perhaps?

by OreoContrarian | 21st Sep 20, 4:14pm 1600661646

National or Labour will fill them with the next wave of immigrants they will let in. The only plan either has is for more immigrants to grow the country and economy.

by sharetrader | 21st Sep 20, 4:56pm 1600664171

ACT have come out and said they will fling open the doors
ACT leader David Seymour says allowing immigrants to fill jobs will lead to more jobs for Kiwis.“The region [Southland] needs Filipinos to come and milk cows and many other things.”
this is a joke they are many young kiwis trying to get into this industry that are pushed out, that struggle to get a foot in the door, likewise i had close family that had 20 years plus experience pushed out of farm managers jobs due to farmers replacing them with cheaper imports as for bringing in experienced farm workers please explain to me where in the world countries dairy farm like us or run high country sheep like us . its BS we export our knowledge even to the Philippine's

by Advisor | 21st Sep 20, 5:19pm 1600665593

Sucks to be a local grad in NZ in this environment.
Entry level jobs listings are scanty and locals are having to compete for these with experienced foreign grads on open work visas.

by NZChinese | 21st Sep 20, 5:59pm 1600667944

"many young kiwis trying to get into this industry" this is an interesting observation. The youngsters I have met don't even want to work at the supermarket; instead they want to be internet influencers. Maybe because I'm Jafa.

by Hook | 21st Sep 20, 6:15pm 1600668928

You're correct NZC. IMO social media is the biggest scourge visited on the planet since the "Black Plague"

by sharetrader | 21st Sep 20, 6:16pm 1600668990

exactly you might want to get out and meet some country kids and some grizzly old farmers.
there are some farmers that do take on young but they are becoming fewer every year
https://www.stuff.co.nz/business/farming/112135495/teen-desperate-for-f…

by Lanthanide | 21st Sep 20, 8:10pm 1600675850

The youngsters I have met don't even want to work at the supermarket; instead they want to be internet influencers. Maybe because I'm Jafa.

Not much different from youngsters from the 60s to 00's wanting to be rock stars. I guess that requires some specific musical talent / skill though.

by RickStrauss | 22nd Sep 20, 9:03am 1600722199

This is basically "I see youngsters on social media. I don't believe they work."

Most youngsters I know who use social media have jobs and ambitions.

by Fritz | 21st Sep 20, 9:47pm 1600681668

And that sums ACT up for me. The odd interesting idea, but it's just the thinking person's neoliberalism really. Conservatism with a funky, liberal veneer. Same old same old.

by Casual Observer | 22nd Sep 20, 10:35am 1600727718

sharetrader, The lack of people interested in the recent Go Dairy taster campaign suggests that there aren't many young kiwis trying to get in to the industry.
Overseas training of young dairy staff in countries like UK and parts of Europe blow NZ training away.

by Glitzy | 21st Sep 20, 4:15pm 1600661741

You cant affect one part of a market without it having a knock on effect. If studios are down, so are one beds,so are two beds and so forth.

This is the biggest danger to residential property values as mortgage rates arent going anywhere but lower. But if rents start moving lower this may have a significant impact.

by Davo3636 | 21st Sep 20, 4:17pm 1600661872

Only down by 17%. I would have thought it would be much more.

by Advisor | 21st Sep 20, 4:26pm 1600662396

It has been about 7 months since no new student arrivals in NZ and even the shortest programme for international students to either qualify for a post-study work visa (30 weeks), or gain enough points for a Level 6 or 7 diploma takes 2 semesters.

So the real effect of no new student arrivals will be felt around early 2021, when those graduating in Nov either return to their home country or move on to post-study work visas.

by Greg Ninness | 21st Sep 20, 4:30pm 1600662603

That's because most of those who were studying this year were already here when the lockdown started to bite. The numbers are only just starting to dwindle now as some return home, although that trend is likely to intensify over the next few months. Those that still have one of two years of study left will likely stay in the country over the summer break rather than go home for Xmas and return next year. So it takes a while for the effects of the lockdown to work through the system. It will be interesting to see what the numbers look like at the beginning of next year.

by MortgageBelt | 21st Sep 20, 5:51pm 1600667508

Downturn in international students is affecting the income of PTEs, Polytechnics & Universities with losses, & job losses likely, especially for those PTEs who are setup primarily for internationals.
The CE of NZIST spoke to RNZ recently about consolidating the several ITP mini-campuses in central Auckland.
It does show the danger of structuring institutes finances to be highly dependent on these students instead of regarding their fee income as the icing on the cake and some ethical commitment to cultural enrichment rather than pure income generation. Successive Govts and Immigration are also culpable for encouraging this behaviour and in the Govts case underfunding Universities & Polytechnics for decades.

by nz-it-worker | 21st Sep 20, 8:03pm 1600675398

Might have to cut back on the 5 million dollar Parnell mansions?

https://i.stuff.co.nz/national/119122778/auckland-university-buys-5m-pa…

by MortgageBelt | 21st Sep 20, 8:27pm 1600676825

Yeah right. Well, that would only be the equivalent of 200 international student fees = the 5 million VC house.
Interestingly, salaries of mid level managers, analysts through to senior execs at these public institutions are double,triple, quadruple ++ of the academics.

by FamilyGuy | 22nd Sep 20, 9:39am 1600724351

University of Auckland has more admin staff than academic staff (teachers). Pretty soon, the number of admin staff will be more than students. lol..
https://en.wikipedia.org/wiki/University_of_Auckland
5 million dollar VC house is just the beginning.

by CJ099 | 22nd Sep 20, 11:31am 1600731068

Yes and I can tell you that the educational institutes here in Auckland do not pay their lectures a decent salary.

by Ron Pol | 22nd Sep 20, 3:11pm 1600744260

Massive impact in AU universities already, slash and burn fully underway. Are NZ universities, different, cushioned, or just a bit slower?

by CJ099 | 22nd Sep 20, 5:12pm 1600751579

No they're slashing and burning too, just a bit more hush hush about it. Like letting all the part-time lectures and a lot of the admin staff go. I know some lectures who are having to fill in on the reception desk (between class) because the institute made some many of their admin staff redundant.

by Fritz | 21st Sep 20, 9:48pm 1600681739

Yes, beginning of next year, that's when we will see the impact...

by fakaza | 21st Sep 20, 5:49pm 1600667394

The effects of the lockdown will ripple down to the beginning of 2021 and even beyond if no vaccine is approved safe.
Focalistic
Kabza De Small

by WellingtonInvestor | 22nd Sep 20, 1:07am 1600693645

Shoebox apartments were never a good idea. IMO they are all about greed, and trying to make as much from as small a space as possible. IMO if they were larger, they would have been suitable for homes for NZers.

by Bret Glazer | 22nd Sep 20, 8:54am 1600721672

We have a city Apartment listing coming to us soon, I have previously sold this unit twice, and for a great price, unfortunately I think this market will create a different market dynamic for our seller.

by The-Economist | 22nd Sep 20, 10:17am 1600726673

Good! The adverse outcomes for city centre living these shoeboxes have created, is shameful. When you build for a transient population and not for the people that actually live here and want to live in the city (close to jobs, close to city life, good PT...) then you block out a massive chunk of housing supply. Thus creating the issues we have today where people don't consider apartment living, with the rents of a ~32sqm (2000s era) or even 1-bd being roughly equivalent to a house with proper rooms outside of the city. This adds to the view that apartments aren't comfortable to live in, meaning there isn't an increased push for better development in the city/city fringe of good quality apartments because Kiwi's just don't consider them an option. And the price of new apartments that are livable for Kiwi's come with such a high price tag, driven in part by a limited supply of good quality apartments due to these increasingly decrepit shoeboxes taking up such prime space. So if they fail, good - lesson learned. Maybe we'll actually get a shift in strategy to build for the people that actually live here (no matter who they are) and an option to quickly add housing supply in places that aren't 1.5-hour drives away.

by karl seastrand | 22nd Sep 20, 10:52am 1600728754

Personally I see international students as a net positive for the average kiwi as long as their time here is not used as some type of pathway to residency once their study time is up and it's time for them to return home. Same goes for migrant workers, we need them but we also need to ensure that the end of the road ends right back where it started; their country of origin.

by CJ099 | 22nd Sep 20, 11:25am 1600730758

One of the main reasons why international students invest so much in getting education abroad is that they are seeking work and residency once they graduate in their new overseas country. Sadly all too often, some of these students expect to just to be able to pay for their degree and are not bothered about actually doing the study work.

by MortgageBelt | 22nd Sep 20, 11:30am 1600731027

Well, that’s not the way the system works. Most international students study here primarily to receive the post study work visa etc. If you removed that incentive then the tertiary sector wouldn’t get the enrolments, other than a few German etc students studying for genuine reasons - global or cultural experience.

by Advisor | 22nd Sep 20, 12:41pm 1600735286

Readjusting our wage thresholds and residency point system higher will also reduce the flow of international students into NZ.

The current setting send a wrong message that NZ is open to accept anyone who is skilled enough to beat our median wage in as much as 3 years following graduation. We're not exactly aiming for doctors, software developers and engineers with the wage threshold at minimum wage plus $7 an hour.

by karl seastrand | 22nd Sep 20, 12:56pm 1600736161

MortgageBelt....then that being the case, IMO overseas students are a massive net negative on most NZ born kiwis (especially our young) and their lifestyle should be protected by altering "the way the system works" sooner rather than later. OFC this won't happen any time soon as it seems the powers that be are determined to prop up the property market at all costs and the immigration club is one of the most effective tools at these tools disposal.

by CJ099 | 22nd Sep 20, 11:19am 1600730349

Yes it's not just the shoebox student residence that are at risk, a lot of educational buildings are now at risk of closure. I know of several central Auckland campus that have merged and closed down other educational units due to the lack of international students. That also means further redundancies for admin staff.