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Australian Student Accommodation Demand Outstrips Supply Despite Tighter International Student Regulations – Image Credit Unsplash+
A significant undersupply of Purpose Built Student Accommodation (PBSA) remains across Australia despite the introduction of tighter international student visa regulations and plans to increase stock.
CBRE’s Australian Student Accommodation 2024 report projects an increase in PBSA stock of 19,000 beds Australia-wide between 2024-2027 representing an 18% uplift. Approximately 30% of the new supply will be in Melbourne followed by Sydney (25%) and Brisbane (20%).
CBRE’s Pacific Head of Research Sameer Chopra said despite the projected uplift in stock and the Australian Government’s recent tightening of international student regulations, there would still be significant unmet demand.
“If the proposed legislation re-balances genuine student migration, who are also more likely to reside in PBSA in the early part of their Australian studies, it is likely to have a positive impact on the PBSA sector. There is also an opportunity for the sector to capture the overflow demand of the increasing numbers of domestic students studying interstate and seeking PBSA because of diminishing supply of private rental sector accommodation,” he said.
The report shows international student demand continues to grow and diversify in Australia. While China (23%) and India (17%) were still the largest cohort in Australia, students from Nepal, Philippines, Colombia and Vietnam all recorded double digit growth over the past decade.
As of April 2024, 688,000 international students were enrolled in Australian universities, this is 12% above pre-COVID peak levels. While not all enrollments translate directly to accommodation needs, these figures highlight the trajectory of demand.
Mr Chopra said, “demand for PBSA in Australia is higher than ever and the current PBSA ratio is approximately 6%, or one bed per 15 students. We estimate there is an acute under-supply of PBSA, particularly in Sydney and Melbourne where Australia has the largest concentration of university students.”
The report found the University of Melbourne and RMIT catchment area in Melbourne’s CBD/Inner North has 17,700 beds while the University of Sydney and UTS catchment in Central/Inner West Sydney has 12,400 beds. CBRE estimates this represents an unmet demand of circa 15,000 – 20,000 PBSA beds and 25,000 – 30,000 PBSA beds respectively.
Closer examination of two sub-markets
CBRE Valuations Director Rosie Young said there was clear investor demand in the sector with PBSA assets performing well.
“Student accommodation continues to perform well, with rents increasing significantly across the market. Occupancy levels also remain strong, especially for those assets near a university campus or transport hub. This has been driven by the continued low vacancy rates in the wider residential market and we are seeing this replicated across all key capital cities.
“The advantage of PBSA is that it gives students security of tenure and all-inclusive rent together with a safe environment and strong sense of community. PBSA provides a high density, efficient solution to current housing challenges.
“The market remains tightly held, with limited availability of operational stock to purchase across Australia. Investors looking to expand into the living sectors are having to turn to development regardless of the challenging conditions around interest rates, construction costs and land pricing. Investors are also showing an increasing interest in conversion opportunities as a way to meet current demand,” she said
The report found rent for student accommodation has increased substantially across the market. Median rents for student accommodation studios in Melbourne and Sydney markets grew at CAGR 6%, from $406 per week to $579 per week between 2018 and 2024.
PBSA rental rates (per bed) in Sydney are at a premium compared to other markets. A typical one bed rent (studio or shared) in Adelaide, Canberra or Brisbane is $300-$400 per week, Melbourne is $350-$700 per week and Sydney is $550-$850 per week.
The report notes consolidation and development are strong themes in Australia’s PBSA sector. Capital continues to pursue development as there are limited opportunities to purchase operational stock in Australia.