Why Southern Europe and Canada Are the Hotspots for Student Housing Investment in 2025

In 2025, the student housing market is poised to be an attractive investment sector despite global economic uncertainties. As highlighted by the BONARD Student Housing Investor Intentions Survey, Southern Europe and Canada have emerged as leading investment destinations in the student housing market. Investors are increasingly shifting their focus towards these regions, drawn by strong demand, favorable market dynamics, and growth potential. In this blog, we will explore why Spain, Italy, and Canada stand out as key investment hotspots for 2025 and how the broader student housing market is adapting to economic pressures.

Growing Interest in Southern Europe

Southern Europe has become one of the most promising regions for student housing investment, particularly Spain, Italy, and Portugal. According to the recent report, nearly 39% of investors identified Spain as a top market for student housing investment, with Italy following closely behind at 29%. The appeal of these countries lies in a combination of factors that make them ripe for investment.

1. Strong Demand from International Students: Spain and Italy continue to see growing demand from international students, a critical factor driving the need for more student accommodation. The cultural appeal, competitive tuition fees, and growing educational opportunities in major cities like Madrid, Barcelona, Milan, and Rome make these countries highly attractive to international students.
   
   
2. Undersupplied Markets: Both Spain and Italy are seeing an undersupply of purpose-built student accommodation (PBSA), with demand outstripping the available stock. As investors look to capitalize on markets where student accommodation is in high demand but low supply, these regions present an attractive opportunity.
   
   
3. Political and Economic Stability: Unlike some other European countries, Spain and Italy are benefiting from relatively stable political and economic conditions, which makes them favorable markets for long-term investment.
   
   
4. Favorable Government Policies: Both countries have shown interest in expanding higher education opportunities and welcoming international students. This policy-driven growth adds another layer of security for investors looking at the student housing market in Southern Europe.
   

Canada: A Rising Star in the Student Housing Sector

Canada, while geographically distinct from Southern Europe, has become one of the most significant players in the global student housing market. According to the BONARD Survey, Canada holds a strong 24% share of the market, making it a top destination for investment in 2025. Here’s why Canada is gaining momentum:

1. Increase in International Student Enrollment: Canada’s international student population has skyrocketed in recent years, driven by the country's high educational standards and post-graduation work opportunities. In fact, Canada has seen a 36% increase in international students since pre-COVID levels, making it one of the largest growing student markets in the world.
   
   
2. Growing Demand for Student Housing: The rise in student enrollment, coupled with the lack of sufficient purpose-built accommodation, has led to an increase in rental demand. Cities like Toronto, Vancouver, and Montreal are seeing strong demand for student housing, with investors responding by increasing the supply of PBSA.
   
   
3. Resilient Market Amid Economic Uncertainty: Despite global economic pressures, Canada’s student housing sector remains resilient. The demand for high-quality student accommodation is consistent, and the long-term outlook for the market continues to look promising.
   
   
4. Attractive Investment Environment: Canada offers investors a relatively safe environment for capital deployment with lower risk factors compared to other regions. The Canadian government’s focus on expanding the education sector and offering attractive immigration pathways adds further confidence to the market.
   

Investor Sentiment: Cautious Optimism for 2025

According to the BONARD Survey, investor sentiment towards the student housing market remains positive for 2025, despite global economic volatility. About 81% of respondents expect investment volumes to grow in 2025, although this growth is expected to be more moderate than in previous years. This cautious optimism reflects the growing confidence in student housing as a stable asset class.

1. Shift Toward Mid-Market and Value-Add Assets: Investors are becoming more selective, opting for mid-market and value-add assets that cater to a broader pool of student demand. While prime assets continue to attract attention, concerns over occupancy, affordability, and international student mobility have caused a shift towards these assets.
   
   
2. Focus on High-Return Markets: Investors are prioritizing regions with the highest potential for return, and Southern Europe and Canada are among the top choices. Spain, Italy, and Canada are expected to see continued investment growth as these markets provide strong returns and long-term value.
   
   
3. Operational Efficiency Over Rent Increases: In response to rising costs, 50% of investors plan to focus on operational efficiencies rather than raising rents, which are expected to grow in line with or above inflation in 2025. This shift is indicative of the increasing importance of sustainability and cost management in the student housing sector.
   

Challenges in the Student Housing Market

While the student housing market presents ample investment opportunities, there are challenges that investors must be aware of:

1. Regulatory and Construction Delays: As seen in the UK Student Housing Update, increasing construction and land costs are becoming significant barriers to new development. The introduction of the Building Safety Act (BSA) and Gateway 2 regulations in the UK has led to delays, impacting the delivery of new student housing stock. Similarly, Southern Europe and Canada face construction hurdles due to rising costs and regulatory pressures.
   
   
2. Uncertainty Around International Mobility: While the demand for international students is high in Spain, Italy, and Canada, there are concerns over potential changes in visa policies. For instance, Canada’s student visa policies and the UK’s post-study work visa could see adjustments, which may affect international student flows.
   
   
3. Financing Costs: Rising financing costs continue to put pressure on investors. The availability of capital remains a challenge, with many investors turning to joint ventures or conditional land sales to mitigate risk.
   
   
4. Yield Compression: The stabilization of yields, particularly in established markets like the UK, may deter some investors. However, the BONARD Survey indicates that despite yield compression, investor interest in student housing remains high, especially in emerging markets like Southern Europe and Canada.
   

The Future Outlook for Southern Europe and Canada

Looking forward, Southern Europe and Canada are expected to remain key players in the global student housing market:

1. Continued Strong Demand: Both Spain and Italy are likely to continue benefiting from growing international student demand. This demand, coupled with an undersupply of PBSA, will likely keep investor interest high, particularly in cities with major universities.
   
   
2. Canada's Robust Market: With 36% growth in international students, Canada will continue to offer strong investment opportunities, particularly as its student housing market becomes more mature. The demand for high-quality student accommodation in cities like Toronto and Vancouver remains high, ensuring continued investor confidence.
   
   
3. Institutional Investor Interest: The BONARD Survey highlights that institutional investors, including pension funds and core capital holders, are becoming more active in student housing. Their interest in Southern Europe and Canada is expected to grow, further boosting the stability and attractiveness of these markets.
   
   
4. Sustainability and Operational Efficiency: As 50% of investors plan to focus on operational efficiencies rather than relying solely on rent increases, both regions will need to adapt to the growing need for sustainable and efficient student housing models. This shift is likely to drive innovation in property management and development strategies.

Conclusion

As investors look for stable, high-return markets in 2025, Southern Europe and Canada are emerging as the most attractive regions for student housing investment. With strong demand, undersupplied markets, and favorable economic conditions, these regions offer investors opportunities to capitalize on a growing student housing sector. Despite challenges like regulatory delays and financing costs, the student housing market remains resilient, and Southern Europe and Canada are poised to lead the way in the coming years.