The big hole in housing as international students soar
The shortfall in purpose-built student accommodation could hit 7000 beds annually over the next five years, as high costs hold back the construction of new facilities just as demand surges, research shows.
The pipeline of new student accommodation has fallen sharply despite strong tailwinds for the sector from the return of international students, rising residential rents, and an undersupply of housing in the broader market, according to JLL
Demand for student housing has soared with a full recovery in international student numbers last year, which now exceed the previous 2019 peak by 4 per cent, according to JLL research.
The resurgence was fuelled mainly by China and India, but there has also been exceptional growth in student numbers from the Philippines, which were up 107 per cent, Colombia 94 per cent and Pakistan 54 per cent.
Stephen Scutts, chief executive of student accommodation operator Castle, said among the biggest reasons for the slowing student housing pipeline was a shortage of land. Where land was available land, stringent planning controls had made projects unfeasible.
“If we had another 500 rooms we could book them out tomorrow. But the issue is there’s not much land left near the University of Sydney, or there are lots of height limits where land is available,” he said.
Jack Bergin, JLL’s head of living capital markets, said the slowing pipeline was due to pressures from high construction and finance costs, as well as builder shortages, which had made such projects hard to complete even if investors had the appetite.
“Securing a builder at all has become the biggest challenge for developers, particularly in smaller markets,” he said.
Annual shortfall of 7000 beds
As feasibility has grown harder, only about 3500 student beds will be created annually from 2024 to 2028. This compares with about 5200 beds being completed annually from 2016 to 2019.
“Australia’s consistently strong university rankings, connectivity to Asia, and the quality of student life have all been key pull-factors for international students studying in Australia,” Mr Bergin said.
JLL analysis suggests there will be an underlying demand for 10,500 beds annually over the next five years, which translates to a shortfall of 7000 beds.
The tight student housing market has meant Castle’s sites were fully booked for 2024, despite increasing rents.
“We are fully booked for 2024, with a decent uplift in yields from 2023. Interestingly, we are seeing considerable growth with Indian students and other countries,” Mr Scutts said.
Other operators were ramping up their student accommodation plans to meet the strong underlying demand.
WA property developer Exal Group began construction on its 960-bed student accommodation in Waterford last week. Once complete, the site will be managed by student accommodation operator Yugo.
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