Australian Student Housing Key Target For Investors as Foreign Students Increase in 2015

The Australian student housing market is set to benefit from the fastest growing foreign student population in the world next year, presenting a significant development and investment opportunity for both domestic and international organisations, according to Savills new research.

Australia saw a 10.1% increase in foreign students in the year to March 2015 to 348,000 enrolments, while its student housing sector recorded annual growth in the volume of beds of 4.3% between 1999 and 2014. The number of beds is projected to continue to grow at an annual rate of 4.7% to 2018 but the sector is set to still experience a significant shortfall in supply with provision of purpose built accommodation currently at just 7%. The market therefore offers significant development and investment opportunities, although competing bids from residential projects for sites in major cities such as Melbourne and Brisbane may drive up costs. Typical prime initial yields stand at 7% - significantly higher than the UK (5%) and US (5.75%).

Savills World Student Housing report notes that Australia is the third biggest destination for foreign students globally, and third most popular destination for Chinese students after the US and Japan. Attracted by an enviable, if comparatively expensive, quality of life, globally-recognised institutions and relative proximity to south-east Asia, Australia’s student population is set to increase exponentially in the coming decades.

Marcus Roberts, director of student investment and development, comments: “With the US market having reached maturity, and the UK having reported record investment volumes of $ 6.5 billion in the first three quarters of 2015, Australia’s growing popularity among students globally offers a potentially new and exciting opportunity. 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. Investors should, however, be aware of the potential risk posed by the Australian Government’s intention to remove the cap on tuition fees from 2016, which could dent the country’s popularity, although experience from changing fee structures in the UK market may suggest that any impact is unlikely to be long term.” 

View the full World Student Housing 2015/2016 report.