5 Best Cities to Invest in Student Housing Real Estate in Australia

As investors set out to explore Australia's property market, finding the most lucrative places can be as challenging as navigating a maze. In 2024, certain cities stand out from the rest as prime spots in Australian student housing real estate. Identifying these key urban centres is crucial for investors keen to maximise profits and capitalise on the market boom.

Given the rapid growth, experts suggest that now is an opportune moment for investors to enter the Australian student housing real estate market. Explore our curated list of prime regions to kickstart your investment journey.

What’s Driving Growth in Australia’s Student Housing Sector?

In 2023, Australia saw record numbers of international students holding student visas, with total enrolments reaching 975,229, marking a 31.4% increase from the previous year(Department of Education). By February 2024, the international student population hit an all-time high, reaching an astounding 713,145 students (ICEF).

Over 2018-23, median rents for student studios in high-demand regions grew by a 5.5% CAGR from $406 to $530 per week, according to CBRE. With rising domestic student mobility, enrollment numbers, and record-low vacancy rates, the student housing real estate sector shows top-line rental growth surpassing inflation.

#1 Sydney: The Investment Gem

Sydney remains a top pick for property investors, standing out as a beacon of stability and opportunity. Despite high property prices, the consistent demand fueled by economic growth and population density makes it a resilient market.

Student housing real estate in Sydney commands significant rental returns, with data from Domain revealing that the average flat leases for AU$ 680 per week, particularly fetching higher rents in inner-city locales near universities. Sydney's rental growth is poised to surpass other major cities in the next five years, owing to applicants seeking top-tier universities, lifestyle-focused students, and greater demand due to a longstanding housing shortage.

Here are a few key highlights for investors considering this region (Your Investment Property):

• Median property price per unit: AU$1,035,000
• Annual capital growth: 6.2% (CoreLogic)
• Rental yields for units: 4.06%
• Average median rent: AU$920/week
• Top universities in Sydney: University of Technology Sydney (UTS), University of Sydney, University of New South Wales (UNSW), Macquarie University

#2 Melbourne: The Cultural Capital

Melbourne's vibrant culture and steady economic growth make it one of the best cities to invest in real estate. With ongoing infrastructure developments and a steady stream of students and professionals, the city boasts a resilient rental market.

The city’s top universities are conveniently situated within a five-kilometre radius of the CBD or in central suburbs, offering students a range of accommodation options. From on-campus residences, which can exceed AU$ 20,000 per year (Domain), to more affordable private rentals in suburban areas, students have diverse choices.

Student-only flats in the city centre fetch an average rent of AU$217 per week, while private flats in northern suburbs like Reservoir average AU$395 per room per week (Domain). Shared student housing in Melbourne is also popular among students seeking to minimize rental expenses.

Here are a few aspects of student housing real estate for investors to keep in mind (Your Investment Property):

• Median property price per unit: AU$412,375
• Annual capital growth: 2.5% (CoreLogic)
• Rental yields for units: 7.35%
• Average median rent: AU$630/week
• Top universities in Melbourne: The University of Melbourne, RMIT, Monash University, Deakin University, La Trobe University

#3 Brisbane: The Rising Star

Brisbane is gradually becoming a hotspot for property investors. The city offers more affordable prices compared to Sydney and Melbourne, alongside significant infrastructure developments. With its perfect blend of lifestyle and investment potential, Brisbane is one of the best cities to invest in student housing real estate.

Asking rents for student housing in Brisbane have reached record highs, standing at an average of AU$ 590 for houses and AU$ 550 for flats per week (Domain). With a vacancy rate of just 0.7%, it's now one of the priciest capital cities to rent in. Thus, the supply gap has created more scope for growth in the private sector led by investors and developers.

Brisbane's universities are conveniently spread throughout the city, including the CBD, South Bank, Kelvin Grove, Saint Lucia, and Mount Gravatt, offering easy connectivity for students between their rentals and universities.

Student housing real estate investors should consider these metrics before investing (Your Investment Property):

• Median property price per unit: AU$545,000
• Annual capital growth: 9.16%
• Rental yields for units: 6.03%
• Average median rent: AU$720/week
• Top universities in Brisbane: The University of Queensland (UQ), Queensland University of Technology (QUT), Griffith University

#4 Perth: The Renewed Opportunity

Perth's property market is on the upswing following a prolonged slump. Fueled by a flourishing economy, the city offers valuable opportunities for investors interested in student housing real estate. Nestled amidst abundant beaches and the picturesque Swan River foreshore, Perth holds undeniable appeal for both international and domestic students.

On-campus accommodation prices typically span from under AU$200 to over AU$600 (Domain), boasting furnished units and communal amenities. Premium off-campus options, offering multiple amenities, can also potentially capture high rental returns.

Some salient points for student housing real estate investments are (Your Investment Property):

• Median property price per unit: AU$655,000
• Annual capital growth: 6.54%
• Rental yields for units: 4.10%
• Average median rent: AU$490/week
• Top universities in Perth: University of Western Australia (UWA), Murdoch University (MU), University of Notre Dame (UNDA), Edith Cowan University (ECU)

#5 Adelaide: The Secure Bet

Adelaide garners acclaim for its steadfast property market. With affordable housing options and a solid economic growth strategy, it is emerging as one of the best places to invest in real estate.

As international students flock to Adelaide, the demand for student accommodation surges, spurred on by the city's affordability, making it an enticing prospect for student tenants and investors alike. Investing in student housing real estate not only promises a steady stream of rental income but also taps into Adelaide's thriving education sector and increasing enrollments, solidifying its appeal to investors seeking long-term opportunities.

With student housing rents in Adelaide leaning towards the higher end, ranging from AU$385/week to AU$709/week, the city's investment potential remains strong.

Here’s what you need to know as a student housing real estate investor (Your Investment Property Magazine):

• Median property price per unit: AU$856,000
• Annual capital growth: 6.60%
• Rental yields for units: 3.51%
• Average median rent: AU$590/week
• Top universities in Adelaide: Flinders University, University of Adelaide, University of South Australia

Global Appeal of the Australian Student Housing Market

Australia's strategic position on a global stage offers distinct advantages for the student accommodation sector, particularly in terms of student security and geopolitical stability.

Strong university rankings, safety, connectivity and quality of life are major factors that attract students seeking higher education to the country. Moreover, the diverse student communities foster a rich multicultural environment with residents from all over the world, promoting respect and socialization in a safe environment.

Drawn by these factors, international student numbers overtook the pre-COVID 2019 peak by 4% last year, driven primarily by China and India. Notably, students from the Philippines (up 107%), Colombia (up 94%), and Pakistan (up 54%) saw exceptional growth, according to JLL’s latest report. The consultancy also highlights the urgent need for more student housing to alleviate pressure on Australia's tight rental market.

With a historically low vacancy rate of 1.1% and a 10.5% increase in asking rents year-on-year, additional supply in student housing real estate is crucial (JLL). The surge in investor interest over the past 24 months has led to new market entrants like the US investment giant Blackstone and existing players expanding portfolios in the student housing sector. As Australia continues on its upward growth trajectory, these dynamics in the market are paving the path for investors in student housing real estate.

Summing it Up

As we step into 2024, Australia's capital cities present a wealth of investment opportunities in student housing real estate. From the electric energy of Sydney and Melbourne to the promising horizons of Brisbane, Adelaide and Perth, each city is lucrative in its own way. For savvy investors, factors like economic vitality, rental potential, and future growth plans are crucial compass points in navigating student housing real estate.

A nuanced understanding of these dynamics can help you make informed decisions in Australia's student housing property investment market. As stakeholders in the student housing market, property operators can leverage amber’s platform to establish their presence in Australia while it continues to gain traction as a higher education destination.