The opportunity in student accommodation

Article10 mins30 May 2024By  Brendan Pryke

Ranked as the second most desirable location to study globally1, Australia’s tertiary education sector has seen unprecedented demand from international students in the last year. Recent Australian Government announcements proposing to cap international enrolments will create a clear need to invest in new quality student accommodation to enable increased international enrolments, a key underpinning of revenue for Australia’s universities.

International student enrolment has rebounded strongly in Australia, exceeding pre-COVID levels. Visa applications surged to 273,586 in financial year 2022-2023, up 32.4% from the pre-COVID financial year 2018-20192. In 2023, international student numbers saw a 27% increase to 786,891, evidencing Australia’s enduring appeal as aglobaleducation destination of choice. The University of Melbourne, The University of Sydney and The University of New South Wales are all ranked in the top 20 global universities, and The Australian National University in the top 50, signalling the quality of education available here3.

However, the strong demand growth has placed a focus on supply of student accommodation and it’s highlighting a shortfall that has been making the headlines. In the year to November 2023 dwelling approvals in Australia were only 174,000 compared to underlying demand of 210,0004 and chronic undersupply of student accommodation across the capital cities has led to near full occupancy across the market and double-digit rental growth heading into Semester 1 20245. Both on and off campus 
operators are reporting rebooking rates are now running at 40-45% up from 30% in prior years6.

Recognising the challenges, the Australian Government has announced proposed changes that would cap the annual intake of international students and help create sustainable growth for the sector. In the plans, education providers will be able to increase their international student numbers by increasing their supply of suitable purpose-built accommodation for students.

Beyond the classroom

Investing with social impact 

The undersupply of student accommodation combined with strong rental growth points to an opportunity for investors and with that, a role to also help sustainably grow Australia’s tertiary sector and make a positive social impact. The capacity to offer high-quality, affordable student accommodation is critical to the long-term competitiveness of Australia’s education system – which is already being challenged. 

Dynamic immigration policy, new technologies, improving global institutions, and new approaches to education are all adding to the competitive global education landscape. And the skills, knowledge and research needed to meet Australia’s own current and emerging social, economic and environmental challenges are rapidly evolving. This puts our universities on notice and our tertiary education system needs to deliver to safeguard the future prosperity of the nation, recognising what students need inside and outside the classroom that makes a difference to their experience. The students arriving in Australia are after more than classrooms and lecture halls; they require safe housing where they can study, socialise, and grow. Finding appropriate accommodation plays a pivotal role in shaping their choices and overall experience.

The International Student Education Agents Association sees accommodation as critical to attracting international students as they increasingly prioritise suitable accommodation when choosing where to pursue their studies. Consequently, universities must go beyond traditional classroom offerings and provide housing that fosters a sense of community and belonging – a home away from home. Differentiation is also crucial for universities to attract and retain students, and providing secure, reliable, and high quality accommodation helps achieve this. Developing disconnected and disinterested housing near universities with no commitment to university standards undermines the system. Conversely, investing in social infrastructure that reflects the university ethos and supports students’ education and life outside of the classroom distinguishes universities.

Going a step further than just providing a quality room, providing a wellbeing support structure to residents is of growing importance and a key component of a quality purpose-built student accommodation offering. Dexus and its partners acknowledge the importance of this and employ dedicated professional staff across its accommodation facilities, in some cases 24/7, to be a first layer of support to students as they pursue their own personal growth and navigate the stresses of student life.

The role of private capital

Private capital has an important role to play investing alongside universities, delivering essential social infrastructure. Collaboration between the tertiary sector and private capital managers such as Dexus is key to providing high-quality student accommodation. This is particularly heightened by the Australian Government’s proposed cap on international enrolments, save for investment in new accommodation. Universities are nuanced organisations with a diverse range of funding sources, education services and research programs. 

When it comes to accommodation, universities value reliable partners that understand the intricacies of construction, property management, and regulatory compliance to ensure accommodation is built to the highest standards, is priced appropriately, and provides a well-rounded student experience that the university controls and shapes. With a portfolio spanning over 7,000 beds across three of Australia’s leading universities, Dexus is the largest on-campus student accommodation investment manager in Australia. 

We’ve spent more than 20 years supporting universities in their objectives and we’re well placed to continue securing high quality purpose-built accommodation for our university partners and their students and providing our investors with an attractive long-term opportunity.

Access student accommodation via our infrastructure funds

1 IDP Education, Emerging Future 3 2023
2 Department of Home Affairs, Student Visas Lodged Report 2023
3 QS, World University Rankings 2024
4 Westpac, Australian dwelling approvals: unit-driven lift, 2024
5 Savills, Australian Student Accommodation 2023
6 Savills, Australian Student Accommodation 2023

Case Study - Australian National University

The Australian National University (ANU) is one of Australia’s 
top ranked universities and its reputation attracts leading students from across the world. It is the smallest of Australia’s leading universities giving it the tools to manage the size of enrolments in parallel with its academic ambitions. Providing attractive and affordable accommodation options for these students is fundamental to the ANU achieving its strategic goals and as a result, the university has developed the largest portfolio of on-campus purpose-built student accommodation in Australia. As the financing partner, Dexus’s long-term partnership with the ANU has been a key enabler in this. In 2022, we successfully brought a further 731 beds into the portfolio, helping to meet ANU’s surging demand for accommodation post-COVID.

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