Student housing developers back on track as policy uncertainty lifts

Student accommodation developer and operator Scape has won backing for a new $6bn fund focused on the sector, which is poised to prosper following a hiatus around the election.

Scape co-founder Craig Carracher says more specialist student accommodation is required. Picture: Jane Dempster

The student accommodation ­sector is emerging as a potential winner from greater policy certainty in the wake of the ­ Albanese government’s re-election.

Top operator and developer, Scape, has won a major commitment from international investment house CBRE Investment Management, which is backing a new $6bn fund ­focused on the sector. While Scape and its rivals had already reaped healthy capital flows as investors switched from traditional office and ­shopping centres to new style living sectors, political uncertainty had weighed on the area.

A number of purpose-built student accommodation (PBSA) projects were ­effectively on ice due to the ­Coalition’s plans to slash international student intakes. Its hostile policy stance towards build-to-rent had also effectively scuttled or delayed attempts by managers to raise money for build-to-rent projects or to sell completed ­towers.

Scape Swanston in Melbourne, which is part of the new fund.

But the re-election of the Albanese government created greater certainty for developers who wanted to build specialist accommodation for students in order to ameliorate their impact on the overall housing market.

Scape Australia executive chairman Craig Carracher said the “abstract undisciplined immigration policy proposed by Peter Dutton” was rejected by voters at last Saturday’s federal election.

“His education policy and failure to nuance housing immigration and international education revealed a superficial policy setting the Australian electorate rightly rejected,” Mr Carracher said. “Despite every warning on these policy settings, the party failed to read the room.”

He said the Albanese government has the opportunity to debunk the myth of international students creating the housing dilemma.

“The Labor Party ... (should) embrace tangible policies that support supply rather than damage demand side economic policy,” Mr Carracher said.

International students at Scape accommodation in Brisbane. Picture: Lyndon Mechielsen/The Australian

The Student Accommodation Council also called for an end to the scapegoating of international students in the housing debate.

“Cutting student visa numbers was always a blunt instrument – one that would do little to ease rental pressure while putting serious strain on one of Australia’s most valuable and resilient export sectors,” said Student Accommodation Council executive director Torie Brown.

While the commitment to Scape Australia was in the works before the election, its recently established $6bn Core Purpose-Built-Student-Accommodation Fund is now well positioned to benefit from the new approach, and it expects more commitments from multiple investors in the next few months. The fund is the first of its kind in Australia, with an in-place portfolio of 33 operational ­student assets with 16,300 beds across Sydney, Melbourne, Brisbane and Adelaide. It has access to Scape’s 6000-bed development pipeline and market portfolio plays as the sector consolidates and matures.

CBRE IM’s Indirect Real Estate Strategies Asia Pacific head Alexandra Crossing, dubbed the living sector a “preferred investment theme globally”. She said having exposure to high quality, core student real estate with Scape complemented the firm’s existing student accommodation investments worldwide.

Scape is also backed by equity commitments from existing investors APG, Bouwinvest, National Pension Service of Korea, Caisse de Depot et Placement du Quebec and UBS Asset Management. That capital was used to expand the fund through a merger with six Scape Australia-developed assets and two development sites valued at $2bn.

Australia’s strong urban student population growth over the past 10 years is set to continue in the next decade which, in addition to a structural under-supply of rental housing, strong rental demand and affordability constraints have created a market gap that developers are struggling to fill. The overflow of students is ending up in many of the build-to-rent towers now popping up in major cities, despite their original design for a local market.

Mr Carracher called out the need for the specialist ­accommodation.

“We are at the ready to fulfil the clear need for more well-designed and located PBSA rental accommodation supporting the delivery of new housing solutions and relieving the demand on urban housing needs around our universities,” Mr Carracher said.