Property woes: student housing pipeline to fall short of demand: CBRE

Despite the number of student units being set to jump 7 per cent over the coming three years, real estate group CBRE says supply will not keep up with demand from international students.

The growing pipeline of Purpose Built Student Accommodation is still not large enough to house the record number of young people choosing to study in Australia, a new study has found.

Around 8,000 new rooms are set to be delivered across Australia over 2023 to 2026, but a new report by real estate agency CBRE has found that the 7 per cent uplift will not meet growing demand.

The findings come against the backdrop of Australia’s worst housing crisis in decades. Record levels of migration has exacerbated problems in the private rental sector, where the short supply of homes has caused rents to soar.

International enrolments were only 6 per cent below pre-Covid peaks in April, with CBRE’s Pacific head of research Sameer Chopra saying the supply and demand balance has been thwarted.

“While enrolments do not directly equate to accommodation demand, as students may be enrolled in multiple courses or in some cases studying online, there’s a clear trajectory of demand,” Mr Chopra said.

“Set against this, just 8,000 new PBSA rooms are in the pipeline, which is likely to be inadequate, with new PBSA supply significantly higher in other global cities such as Paris (18,000 rooms) and London (15,000 rooms) over the same time-period.

“Compounding Australia’s supply issue is the fact that vacancy in alternative inner-city apartment stock is forecast to stay sub 2 per cent.”

Students began to flood back to Australian in 2023 as more surety was provided around international borders remaining open and China ordered students studying internationally to return to campus.

Just over a third (36 per cent) of the nation’s PBSA stock is in Melbourne, which typically has a larger share of the international student cohort. However, half of all development work in the pipeline is in Sydney.

The report also highlighted that rent growth and resilient occupancy have helped to cushion PBSA yields on a global basis in the face of rising financing costs.

CBRE director PBSA valuations, Rosie Young, said activity to date had been relatively limited as the market was still in a ramp-up phase in Australia and stabilised, operational assets were tightly held.

However, there was clear investor demand, underpinned by the sector’s strong fundamentals, with many investors seeing the sector as a hedge against inflation, with education and housing tending to be the last areas that people cut back on when living costs rise.

There is a high level of activity. A partnership between the University of NSW and Iglu will see 1066 apartments delivered across opposite the institution’s Kensington campus, while Wee Hur has planned 411 beds to service the University of Sydney and University of Technology Sydney.

Brookfield and Citiplan have also committed to 935 beds near Brisbane’s Queensland University of Technology, as well as 465 beds in the Melbourne suburb of Carlton, close to the University of Melbourne. Scape is also planning a series of projects in major capitals.