A world of opportunity for student housing investors

A waning overseas student housing market and a dearth of local beds has left the door open for Australian investors and developers.

Australia now attracts the third most foreign students of any country in the world but the construction of student housing hasn’t kept pace, a Savills research report says.

The report shows there are now about 348,000 international students studying in Australia but a huge shortfall in the number of beds available to them, with a national provision rate of 7%.

Build it: Heat on developers over international student housing

Savills Hotels assistant valuer Iris Liu writes in a blog post that some overseas investors developers have already recognised the opportunity to gain a foothold in the Australian market.

Only about 134 beds will be available for every 1000 international students in 2018

“We’ve already seen some landmark deals in Sydney, Melbourne and Brisbane, but the market is relatively immature compared to the US and UK, and therefore presents good prospects for entrepreneurial capital and cash-rich organisations which have already cut their teeth in the US or UK,” Liu says.

“UK based developer Iglu, has been prominent in several cities with two projects in Sydney, and others in Melbourne and Brisbane while Campus Living Villages, The Pad, Student Housing Australia, UniLodge and Urbanest have also been in the mix.”

Australia is severely lacking in housing for international students

OECD data reveals 87,000 Chinese students are enrolled in Australian universities each year – the fourth largest flow of students between two countries anywhere in the world.

Liu says there are more than 20,000 beds due to be added to the national student accommodation market by 2018, taking the total supply to more than 94,000.

But she says Australia will still be significantly undersupplied, with 7.5 international students for every available bed, making Australia a prime target for further investment.

The purpose-built student housing sector has … become established as a highly investible asset class

“In other words only about 134 beds will be available for every 1000 international students in 2018, indicating a significant shortage of private rental student accommodation,” she says.

“Our key competitors – the UK and USA education markets – provide far higher numbers of purpose-built student beds.”

“As with many host countries, the purpose-built student housing sector has consequently become established as a highly investible asset class.”

In September, International Education Association of Australia chief executive Phil Honeywood called on education providers and commercial developers to take up the challenge of housing Australia’s foreign students, which the Federal Government hopes to grow to more than a million by 2025.

“The international education sector has often been disappointed at the lack of engagement­ by commercial developers in terms of enhancing the student experience,” Honeywood says.