The Rise of New Generation Boarding Houses

The Savills Blog

The Rise of New Generation Boarding Houses

We explore next generation of boarding houses, and the outlook for growth.

What is the new generation of boarding houses?

New generation boarding housing is still a relatively new concept. The State Environment Planning Policy (Affordable Rental Housing) (AHSEPP) was published on 31 July 2009 to increase the supply and diversity of affordable rental and social housing in NSW. Since then, the concept of ‘new generation’ boarding houses was introduced, which offers a business investment opportunity targeting students, young working singles and couples.

This new type of boarding house includes private bathrooms and/ or food preparation facilities and some are self-contained rooms with similarities to studio apartments. However, the rents are still higher than traditional boarding houses.

Why are they a good investment?

Boarding house investment is seen as lower risk from a developers’ perspective with more stable income compared with other short stay backpacker hostel accommodation. In addition, you can avoid seasonal fluctuations in more fringe locations that you might get with backpacker accommodation.

Plus, the support of boarding house use from the NSW government also includes tax exemption and a Boarding House Financial Assistance Program.

A relatively new investment opportunity…

The rise of investment in boarding houses is a combination of the more stable income in comparison to backpacker hostels, but also a change in legislation in Sydney. As the planning policies for new generation boarding houses have only recently been introduced, investment activity has been virtually non-existent; characterised by a small domestic investor pool, and hence the market has yet to establish any firm capital transaction benchmarks.

To learn more on the outlook and trends of the hotels industry, including alternative investments, view the latest Hotel Market 1H/2015.

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