Investors targeting student housing

Investors targeting student housing The world’s fastest growing foreign student population presents significant development and investment opportunities in Australia, according to Savills’ latest World Student Housing report.Australia is now the third biggest destination for foreign students globally, and the third most popular destination for Chinese students after the United States and Japan. Savills’ report finds that Australia’s foreign student population is set to increase exponentially in the coming decades as students are attracted by “an enviable, if comparatively expensive, quality of life, globally-recognised institutions and relative proximity to south-east Asia.”Australia’s student housing sector recorded annual growth in the volume of beds of 4.3 per cent between 1999 and 2014. Even more impressive, the 348,000 foreign student enrolments over the year to March 2015 translates into a 10.1 per cent increase. While the number of beds is projected to continue to grow at an annual rate of 4.7 per cent to 2018, the sector will experience a significant shortfall in supply with provision of purpose-built accommodation currently at just seven per cent. “With the US market having reached maturity, and the UK having reported record investment volumes of US$6.5 billion in the first three quarters of 2015, Australia’s growing popularity among students globally offers a potentially new and exciting opportunity,” says Marcus Roberts, director of student investment and development at Savills.Roberts says that, despite some landmark deals in Sydney, Melbourne and Brisbane, the market is “relatively immature” compared to the US and UK.”The Australian market presents good prospects for entrepreneurial capital and cash-rich organisations which have already cut their teeth in the US or UK,” he explains.While significant development and investment opportunities abound, competing bids from residential projects for sites in major cities such as Melbourne and Brisbane may drive up costs, Roberts warns.”Typical prime initial yields stand at seven per cent – significantly higher than the UK and US, at five and 5.75 per cent respectively.”Investors should take heed of the potential risk posed by the Australian Government’s intention to remove the cap on tuition fees.”This may dent Australia’s popularity, although experience from changing fee structures in the UK market may suggest that any impact is unlikely to be long term,” Roberts concludes.Download Savills World Student Housingreport.