Record supply of new student housing as international students return

Providers of purpose-built student accommodation are likely breathing a sigh of relief, with the latest figures showing a surge in international arrivals.

Since Australia reopened to eligible visa holders in mid-December, more than 100,000 international students have arrived, according to provisional estimates by the Australian Bureau of Statistics. For context, less than 5,000 international students in total arrived during the preceding 18 months.

Furthermore, the Department of Education estimate 27% of all student visa holders are still yet to return to Australia.

While these figures remain below the pre-lockdown levels seen in early 2020, they point to recovery in one of Australia’s most valuable sectors.

This is good news for providers of PBSA, particularly given the sector is due to see a record number of new dwellings completed over the coming two years.

Throughout 2022-23, around 17,000 beds are set to be delivered, and there are a further 13,000 at various stages in the development pipeline according to the latest PropTrack data. New South Wales and Victoria account for the bulk of this supply, accounting for 70% of these new beds between them.

As international students return, the development and delivery of more PBSA is important. Prior to the pandemic there was a chronic undersupply of student housing in Australia. This led to faster rent growth relative to the residential sector more broadly, contributing to the high cost of living for domestic and international students alike.

What’s more, cities like Melbourne and Sydney are re-emerging from the weaker conditions brought on by the pandemic and rents are now beginning to rise. In Perth and Brisbane, rents have already been increasing for more than 12 months.

International students – many of whom struggled during the height of the pandemic – are returning to Australia as more purpose built student accommodation dwelling are completed. Picture: Getty

Australia offers many drawcards for students looking to study abroad. Not only is Australia home to five universities ranked in the global top 50, our cities rank among the most livable worldwide.

Despite these benefits, Australia’s high cost of living – including the cost to rent – acts as a deterrent for many students looking to study abroad. Given the significant contribution international students bring to our economy, this is an issue that needs to be addressed.

The high number of PBSA set to be developed over the coming years is good news for students as it should help to moderate rent growth in the sector.

Despite the short-term challenges to investors brought on by the pandemic, on balance it is likely to have increased demand. The risk profiles of many assets have shifted over the past two years, and investors have become more cautious in the opportunities they are targeting.

Prior to the pandemic in 2019, ABS data shows international education was a key pillar of growth, supporting 240,000 jobs and delivering more than $40 billion to the economy. While the recovery will take time, this growth should return.

As a well-established and relatively high yielding sector with a strong long-term outlook, PBSA looks set for success and should continue to drive up further development.