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Student accommodation undersupply to ease after skyrocketing demand from international students
A deep-rooted undersupply of student accommodation in Australia’s capital cities will start to ease over the next few years, but experts say the number of beds is only just keeping up with the projected influx of international students.
Savills’ director of student accommodation Conal Newland said the supply of purpose-built student housing was coming off a “very low” base.
“The overall provision [of beds] is looking pretty consistent when you take into account the growth of international students, [but] that supply is really just meeting the growing demand,” he said.
He attributed the undersupply to a lack of focus on the student accommodation market in Australia in the past.
“Compared to English cities, you can see that provision is a lot higher over there,” Mr Newland said.
“The Australian market is five to 10 years behind the UK, but now we’ve seen institutions come in, we’ve seen large-scale development, but it’s just playing a bit of catch-up.”
A Savills report released on Wednesday shows that $475 million has been spent so far this year on sites for student housing around Australia.
Of all the capital cities Sydney’s supply of student housing is the tightest, with the provision of beds covering only 2.6 per cent of full-time students. This compares with Melbourne, which has beds for about 7.2 per cent of students, while in Brisbane, stock can accommodate for 9 per cent of students.
The harbour city has 5,435 beds under way in the next four years, up from 3,665 beds last year. Melbourne has the biggest development pipeline of 16,294 beds, followed by Brisbane, where 10,682 beds are expected to be delivered.
An analysis of the latest Department of Education and Training data shows there were about 63,502 international students in Sydney last year.
Savills’ associate director of student accommodation Rachel Coates said Sydney remained the most popular Australian market for student housing investment, thanks to its significant supply and demand imbalance, world-class universities and status as a global city.
But land values of residential real estate in CBD fringe areas have made it the most difficult market to enter, leading developers to eye sites outside of the CBD, closer to transport hubs.
“Debt funding for new development-led projects has affected a number of property asset classes through the first three quarters of 2017, including student accommodation. Accessing debt finance for new projects is anticipated to remain challenging,” Ms Coates said.
Mr Newland noted the student accommodation market in Australia will begin taking centre stage in 2018 and 2019.
“There has been a new wave of investment and over the next two years, we’re going to see a rapid rise in the number of high quality beds that are operational in Australia.”
Major universities were also ramping up their investments in student accommodation assets, he said.
“In Sydney, the University of Sydney, UNSW and Macquarie University are currently active in improving (or) extending existing residential portfolios. The University of Melbourne has been active with a number of projects in the last 12 months, as have Deakin and Monash Universities. In Brisbane, the University of Queensland and QUT have also considered new projects.”
The report indicated that at least one new developer will be entering the market between late 2017 and early 2018.
“We also see an opportunity for more competition in the independent third party management of student accommodation” Mr Newland said.