Student numbers in Australia continue to rise quickly and this growth has been driven by international students who have high levels of affordability and see themselves as having fewer options for location. By contrast, over the past five years, domestic student numbers have stabilised and, in some institutions, have even started to drop.
At Macroplan, we’ve seen that students in their first one or two years’ of study will often opt to live in student housing before moving into the broader community once they are more confident living away from home and have made friends with whom they can house share.
Overall student numbers are now growing at around 2-3% per annum, and we believe the numbers will continue to rise for at least the next 10 years. Alongside this, student housing supply has started to increase substantially as a number of international players have moved into the Australian market.
When looking at investing in student housing, there are three different markets. Firstly, there’s pure student housing which has been purpose built. Second, there is accommodation which could be used to house students but could also be substituted for general use, and this might be something like an apartment which is close to a student housing complex.
The third investment option is one that is purely residential which just happens to also be attractive to students.
Understanding the student market is important because it can lead to higher rents, lower long-term vacancies, and lower long-term risk for your investment. Why higher rents? Because students share so they rent by the room, whereas a family may have only one income from which to pay rent. Also, many international students receive additional financial support from their parents.
Many of the inner city markets, such as Glebe in Sydney and Carlton in Melbourne, have significant numbers of student renters, but also strong demand from the general population, which drives up rental and underpins stability on the rental market.
Most tertiary institutions in Australia have ongoing demand for student accommodation, both within our capital cities and beyond them. As some institutions are choosing to relocate parts of their campus, new demand is created.
For example, the University of Newcastle is moving portions of its campus into the Newcastle CBD to make it more attractive to potential students. While they have plenty of housing on their existing site, none has been established in town.
NeW Space is the University of Newcastle $95 million landmark education precinct in the heart of Newcastle's CBD.
Likewise, Deakin University has moved into the waterfront at Geelong to take advantage of high levels of amenity and to attract a broader market.
Just as institutions are changing their physical presence to draw students, some are changing their course offerings. Certain niche courses and subjects can attract overseas students, such as economics and commerce which have broad global appeal, and many smaller institutions are beginning to increase their student intakes by offering a better course mix.
So investing in student housing requires looking at the location, the institution and its course mix to determine future demand.
About the author:
Brian Haratsis is MacroPlan’s Founder and Executive Chairman. Brian is an economist and future strategist with over 30 years experience as an advisor to governments and major corporate clients throughout Australia and New Zealand. For more information or to discuss your property research requirements, please contact Amy Williams on 02 9221 5211 or firstname.lastname@example.org.