Demand for student digs soars: Knight Frank

Demand for student digs soars: Knight Frank

10 August 2018

Australia’s top universities are taking in a greater proportion of full fee-paying international students, which is driving strong demand for more purpose-built student housing, states a new report from Knight Frank.

This year alone 8,290 new purpose-built student accommodation beds will become operational nationally, a rise of 20 per cent on the previous year, notes the Student Housing 2018 report.

Sydney, Melbourne, Brisbane and Adelaide will account for 80 per cent of the new supply.

But demand still outweighs supply with growth in both local and international students underpinning demand.

For example, in the 2016 academic year, there were 337,117 full time Higher Education international students studying in Australia, but 93,890 PBSA beds paces as at the end of 2017. This equates to a theoretical international student to bed ratio of 3.6:1.

A report from Deloitte Access Economics estimates that onshore international students may be capable of increasing from 500,000 students today to 720,000 by 2025—a compounding annual growth of 3.8 per cent.

“When students are looking to study abroad, research shows that lifestyle factors are equally as important as the quality of education,” Knight Frank research director Paul Savitz said.

“Because Australia offers international students a fantastic lifestyle with excellent employment opportunities, we have every confidence international student numbers will continue to rise.”

Because most Australian universities derive between 20 to 30 per cent of their income from international student fees, their financial health is intrinsically linked to the availability of quality and affordable student accommodation.

The contribution made by international students to the Australian economy grew from $11 billion in 2007 to 28 billion in 2017.

On the ground, student accommodation developers have been busy, with many developers are converting their residential projects into hotels, especially in Sydney and Melbourne, where off-the-plan apartment sales have slowed.

Singapore’s Wee Hur, for example, has been buying sites in Melbourne and Sydney, with the aim of establishing a fund holding 5,000 beds locally, with a portfolio value of more than $1 billion.

Another big player is Scape which recently closed out a $500 million student accommodation fund with backing from two European institutional investors and a Middle Eastern sovereign wealth fund.

With the latest capital raise, Scape’s Australian platform has grown to more than $1 billion in equity commitments, giving the company firepower to deliver more than 10,000 new student rooms.

Universities are also becoming players in the student digs space.

The University of Melbourne, for example, has brought in advisory group Flagstaff Partners to run an investment process on the two new student accommodation developments with a combined portfolio of close to 1,000 beds.