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Student accommodation has become a global asset class in its own right. Its growth is being driven by the increase in the worldwide mobility of students and global operators’ rising interest in using key management platforms to generate international student accommodation brands.
Global investor appetite is also growing, with institutions seeking to diversify portfolios outside of the US and the UK. While the demand for purpose-built student accommodation in Australia is rising, the local market is relatively immature in comparison to the US and the UK.
The key barrier to entry in the Australian market is the viability of student accommodation development compared with other land uses. With student and residential developments often having the same location requirements, student accommodation developers are regularly outbid due to the strength of the residential markets. This has slowed down the institutionalisation of the asset class and as a result there may be fewer transactions in the Australian market in the short term.
In the UK, however, there has been
Analysis: The market for student accommodation assets in Australia is still relatively young – with strong growth prospects.
By Natalie Breen and Emily Fell
unprecedented student accommodation investment activity in 2015, totalling £ 3.8 billion($ 8.2 billion) in the first six months, 2.1 times the total volumes for all of 2014. This has been dominated by large portfolio transactions, the majority of which have been taken up by international equity. Foreign investors continue to be attracted to the sector’ s annual rental growth, but also the forecast rise in students.
Back in Australia, the rising number of students, in particular internationals, is fuelling demand for more affordable accommodation.
International student visa holders in Australia for 2014 totalled 453,500 from 191 countries( the majority from China) or a 10.4 per cent increase on the previous year. Most held a higher education visa( for a bachelor degree, associate degree, higher education diploma, graduate certificate and graduate diploma or master’ s by coursework), followed by those who held a vocational education and training visa.
Foreign students provide a valuable source of revenue for universities and offering potential students accommodation close to campus in a secure and safe environment is a top priority for educational institutions. Specialist private operators are entering the market to offer purpose-built accommodation, providing an alternative to on-campus accommodation but with the same management control and all-inclusive set up.
Given that the number of student visas issued each year is increasing and the relatively low number of purpose-built student accommodation beds available, there are opportunities for this investment class to continue to grow in Australia, and for off-shore, Asian-based investors to take advantage of this.
The growth of the purpose-built student accommodation( PBSA) market has given students who cannot access university halls of residence choice. The PBSA options offer higher quality accommodation, rents inclusive of bills, varying options on tenancy lengths, a branded product, enhanced internet connectivity, professional management and security. Preferred development sites provide easy access to one or more universities or private colleges, with good access to transport and amenities as well.
Student accommodation may be in the form of self-contained studio apartments with kitchenettes, charging a premium weekly rent. Alternatively, students can rent an ensuite, or non ensuite, bedroom and share communal kitchen and living facilities with two to eight people for a more affordable rent. Successful PBSA schemes will have a mix of bedroom types to accommodate a wide range of budgets.
There are four main models for delivering student accommodation:
• Management-only providers – these partner with universities or private
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