Student Bed Shortfall Provides Window of Opportunity for Developers

The Savills Blog

Student Bed Shortfall Provides Window of Opportunity for Developers

With Australia set to grow in the coming years, overseas student accommodation presents a significant development investment opportunity.

According to a Department of Education and Training (DET) report, international student enrolments are at nearly eight times the number of purpose-built beds available.

Furthermore, the National Census of University Student Accommodation Providers Report 2014 by University Colleges Australia, stated that there were 74,482 student accommodation beds, both on and off campus, as at November 2014, however DET research shows the ratio between the number of international student enrolments and student accommodation beds available as 7.9:1.

Student enrolments will continue to rise with predictions that numbers are on track to break the 630,000 record set in 2009 by the end of 2015 and up to 700,000 in 2018. 

An opportunity for developers and investors

Undersupplied, the sector offers significant potential for developers and investors, including educators, to provide beds to meet this shortfall. There are currently 20,152 beds in the pipeline nationally for delivery by 2018, which will take the total supply to 94,634 beds. Given the current student numbers and the growing foreign student population, there is significant development and investment opportunity in this sector. 

The key players are Melbourne and Sydney 

In Melbourne and Sydney, which account for two thirds of international student enrolments, developers, educators and governments have become key players.

In New South Wales, the State Government has moved to increase the supply of affordable rental housing which has encouraged the conversion of hostels to a `new generation’ of boarding houses for students while the University of Sydney has refurbished the Queen Mary building to provide 800 student beds.

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.

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.

The gap is set to continue

Australia’s growing popularity among students globally will only add to the shortage of purpose built student accommodation. It is this growth that will underpin demand for student accommodation, which has significantly outpaced supply.

Assuming all the proposed student accommodation developments proceed, the international students to beds ratio will only decrease marginally from the current 7.9:1 to 7.5:1.

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. 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.

Interested in learning more?

For more information on student accommodation and world trends, view our latest reports.

Recommended articles