Huge undersupply issue for student accommodation

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A shortage of student accommodation is having a significant impact on the wider Australian rental market according to a global real estate services firm.

A report from Knight Frank - Australian Student Accommodation – The Investment Opportunity – claims current purpose built student accommodation (PBSA) is greatly underserving the growing number of tertiary students in Australia.

Continued growth in the number of foreign students attending Australian universities is a main factor the accommodation shortage.

According to Knight Frank, Australia is currently undersupplied by nearly 300,000 PBSA beds.

“Undersupply of PBSA bed spaces is currently estimated at 290,525 nationally. In simplistic terms there are 290,525 higher education students studying in Australia without access to a PBSA bed space, and thus renting accommodation privately,” Paul Savitz, Knight Frank associate director, research and consulting.

“Often these are apartments or share houses close to city centres and transport nodes, consequently occupying much-needed key worker and low-cost housing in the major cities across Australia,” said Mr Savitz.

Knight Frank’s report claims the majority of the student accommodation undersupply is across Melbourne (86,686), Sydney (74,763), Brisbane (36,689) and Perth (23,554).

“By the end of 2020, Knight Frank projects this national undersupply figure to increase by 39% to 404,700 as the rate of full-time higher education student growth continues to outpace the development of PBSA bed spaces, and the number of mobile students, as a proportion of the total, increases on trend,” Savitz said.

“As a result of limited supply of quality and affordable PBSA, Australian Institutions are reliant on the private rented residential market.”

While the PBSA shortage may not be great news for universities and their students, Savitz said if policy makers are willing to tweak some planning controls it could become a lucrative investment path.

“The UK PBSA market has now matured into a sector where the transaction of assets and land has averaged close to £2 billion annually over the past five years, with investment activity reaching record levels of over £5 billion in 2015.

"Traditional commercial property sectors are reliant upon demand derived from the market and potential occupiers at any one time – a measure which has historically proved relatively volatile; particularly within emerging property sectors.

“In contrast, the student accommodation sector benefits from a more stable, tangible and certain demand source – the Australian higher education student population. And demand is rising as this population grows.” 

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