Chronic student accommodation shortage to worsen: report

Australia’s student housing market is ripe for investment. Picture: Savills

Australia’s resurgent international education sector could be stymied with a shortfall of almost half a million purpose-built beds, despite increasing appetite from institutional investors and although supply is forecast to increase 36% by the end of the decade.

An analysis by Knight Frank shows 30,000 beds are currently under development or proposed, which could create a dedicated student accommodation pool of about 111,250 by 2020.

But the recent emergence of heavyweight investors into the student accommodation sector will not be enough to close the supply gap between the number of university students and the number of purpose-built beds, ­according to Knight Frank researcher Paul Savitz.

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He estimates there are currently 290,000 university students without access to purpose-build student accommodation — although the analysis does not include whether those living in other accommodation would choose or could afford to move to new premises.

Australia's student accommodation market is vastly undersupplied.

Australia’s student accommodation market is vastly undersupplied.

“By the end of 2020 … this ­national undersupply figure is projected to increase by 39% to 404,700 as the rate of full-time higher education student growth continues to outpace the development of beds, and the number of mobile students, as a proportion of the total, increases on trend,” Savitz says.

There were earlier fears that increasing attention on the sector by heavyweight investors could lead to too many beds being developed. This followed a spate of deals, including the entry of Singapore’s Valparaiso Capital, GIC, Macquarie and Goldman Sachs, to the sector.

Meanwhile Scape Student Living, backed by Dutch fund APG and ICBC, last week finalised a second site in Sydney, taking the value of its development pipeline to $700 million.

Scape executive director Craig Carracher says there has been a “dramatic shift” from cottage industry in the last four years, but supply continues to fall short.

Australia's student accommodation shortfall is expected to reach 400,000 beds by 2020.

Australia’s student accommodation shortfall is expected to reach 400,000 beds by 2020.

“One bed in 13 places required is purpose-build accommodation for the Australian education sector, in London it’s one in four,” Carracher says.

While risks of instability in the sector remain low, developments overseas could impact Australia’s $19 billion international student market.

Saudi Arabia, with 6000 students in Australia, has signalled a change of policy to restrict funding for overseas education to the world’s top-ranked universities.

However, the potential departure of Britain from the European Union would create new visa barriers and higher fees for European students, leading many to consider study in Canada, the US or locally instead.

This article originally appeared on www.theaustralian.com.au/property.