In-Depth Analysis of the Australian Student Housing Industry

Australia is among the top destinations for higher education, along with the UK, the US and Canada. The high quality of education, esteemed universities and diverse culture are top factors for attracting students to Australia. The continuous increase in the international student population has significantly shaped the Australian student housing market, making it a robust and attractive sector for investors.

The blog offers investors and stakeholders a complete analysis of market size, the latest trends, challenges, solutions, and forecasts of the Australian student housing sector.

Overview of the Australian Student Housing Industry

Australia holds a prominent position in the global student housing market and is growing at an impressive pace after the pandemic. The post-COVID recovery of the number of international students has shaped this country into a top study destination today. At the beginning of 2024, the number started crossing pre-pandemic levels. Plus, China’s mandates for in-person attendance at foreign universities further boost the student population. The increasing number of students entering the country creates a surge in demand for student housing.

Market Size of the Australian Student Housing

• According to the Beyond Beds Report, the Australian student housing market is worth around AU$10 billion and is growing at a CAGR of 17%.
• On-campus apartments account for around 10% of the market share, with nearly 60,000+ beds across 42 universities in Australia.
• Off-campus apartments, including PBSAs, account for the remaining 90% of the market.

Enrolment in AY (2023-24)

• There were around 975,229 international students enrolled in the year 2023 (Source: Australian Department of Education)
• A total of 56% of which came from five countries, namely China (22%), India (17%), Nepal (8%), Philippines (5%), Vietnam (5%).
• The number of international enrolments as of February 2024 was 703,245, representing a 21.4% increase since 2019, highlighting post-COVID recovery (Source: Australian Department of Education).

• The enrolments will exceed 900,000 in 2024 and continue to rise in the coming years, reaching up to 1,000,000. (Savills)

International Student Revenue

• The export income from international students in Australia reached AUD 37.6 billion pre-pandemic.
• After the cross-border opening and students coming back for offline studies, the export income recovered to about AUD 36 billion in the financial year 2022-23.

• China stands out as the top contributor to Australia’s education export income of AUD 8.7 billion, representing 24% of the total revenue.
• India is rapidly emerging as a major contributor, generating AUD 5.9 billion and accounting for 16.3% of Australia’s total education export income during the same period.
• Nepal follows with 9.60%, while Vietnam and Colombia contribute 4.06% and 3.10%, respectively. (Australian Department of Education)

Market Trends in the Australian Student Housing

In today’s time, students are more inclined towards high-quality living. Hence, purpose-built accommodations have emerged as a popular choice. The rents for student housing in Australia have also increased in most of the cities after the pandemic.

1. PBSA Beds Pipeline

• Currently, almost 79,000 purpose-built student accommodation (PBSA) beds are available across the inner city areas of Australia’s eight capital cities. In 2023 alone, an additional 4,907 beds became operational.
• CBRE anticipates that around 8,000 PBSAs will be delivered across Australia from 2023 to 2026, representing a 7% increase.

• Melbourne holds 36% of the national student accommodation room stock, reflecting the large share of university students, particularly international students.
• Sydney leads the number of development pipelines. CBRE estimates Sydney’s contribution of nearly 50% of the bed supply until 2026, followed by Perth, Adelaide, Brisbane, and Canberra.

2. Rental Trends

• The rent for student beds varies depending on whether it's a premium studio or a shared unit.
• The location and proximity to universities and the amenities offered also influence the rent of the apartment.
• Various student residence options are available in Adelaide, Canberra, and Brisbane for $300 to $400 per week.
• In Melbourne, rents typically range from $300 to $500 per week, while Sydney’s rents can go up to $550 to $750 per week.

3. Top Players In Australian Student Housing

‍Australia's five largest student housing providers dominate the market, accounting for 80% of the total industry share (CBRE). This trend highlights the role of key players in shaping the student housing landscape.

• Unilodge: Australia’s largest student housing provider, UniLodge, manages around 35,000 beds in Adelaide, Brisbane, Canberra, and Melbourne.
• Scape: The portfolio comprises 16,000 beds across Sydney, Melbourne, Brisbane, and Adelaide. By 2027, Scape is expected to have 19,800 beds in the pipeline.
• Campus Living Village: There are around 6,700 beds operational, mostly offering on-campus residences across Sydney, Melbourne, Brisbane and Perth.
• Iglu: Iglu currently owns and operates 5,400 beds across Brisbane, Melbourne, and Sydney, while 1,500 beds are under construction.
• Yugo: The portfolio comprises 1900 operational beds in Adelaide, Melbourne and Perth.

4. Top States For International Students

‍Strong university rankings and the high quality of student housing in Australia make it a prime destination for international students. The QS University Rankings 2024 ranked seven Australian universities in the top 100 globally, including the University of Melbourne, the University of Sydney and the University of NSW. Australia strongly reflects its global reputation.These prestigious universities attract large numbers of international students, making certain states a popular choice to pursue their education.

Australian Student Accommodation: Challenges & Solutions

The Australian student housing market faces many challenges, impacting both domestic and international students.

1.Supply-demand gap: The supply of beds has increased at a lower rate as compared to the number of student enrolments in universities. The student-to-bed ratio is 7:1, resulting in a shortage of affordable and accessible student homes. (JLL)

2. Limited regulations: The student housing market operates with minimal regulation, leading to a scarcity of affordable options for students. As a result, many students may have to live in expensive or low-quality homes.‍

3. Competitive market: The student housing market faces competition from other sectors, such as multi-housing, residential and hotels, which may offer more attractive investment opportunities for developers and investors.

4. Building cost inflation: The housing industry in Australia is facing building cost inflation, which includes labour shortages and high material costs. This leads to delays in the construction of new student housing projects and increased costs.

5. Delays in approvals: Developers often face delays when seeking approvals for building new student housing projects. It further worsens the supply shortage.

Key Solutions to Market Challenges in Australia

The stakeholders need to address challenges related to affordability, planning, and construction to meet the growing need for quality student residences. Here are some key strategies to address the challenges faced in the Australian student housing industry to support its growth:

1. Public-private partnership (PPP or P3): The PPP model can help solve the housing crunch by bringing investors, universities, and the government together to provide housing solutions collaboratively.‍

2. Implementation of new regulations: New regulations are integral to maintaining quality and affordable housing. These regulations need to ensure that students can access high-quality apartments and rents without financial strain.

3. Flexible housing options: Flexible lease terms and diverse housing options like co-living can be a good alternative. These options help tenants looking for affordable short-term stays.

4. Financial support to developers: Financial incentives, such as tax exemptions or grants, can encourage the construction of new student housing projects and help reduce construction costs.

Future of Student Housing in Australia

Australian student housing is on a promising path of growth and expansion. A key indicator is that after the pandemic, on-campus and off-campus operators reported a notable spike of 85% in rebooking rates. It encourages investors to invest in housing options like PBSA. Additionally, occupancy rates have recorded up to 99%, indicating the opportunity for developers to build more housing in this sector for high rental returns.

Due to the high demand, the market is observing the emergence of new players. These entrants bring new ideas, technologies, and innovations, making Australian student housing more attractive. With the sector booming with opportunities, student housing operators looking to expand in Australia can list their portfolios with amber for growth and targeted reach.