Student accommodation is a growing industry particularly in the eastern states due to the increase in international enrolments across major universities.
In the 2013/2014 financial year there were 422,324 international enrolments across all forms of education in Australia, close to half of these were for higher education including postgraduate studies. Considering each state, during 2013 within the higher education sector there were 112,897 enrolments in Victoria, NSW behind with 86,923 enrolments which is still ahead of Queensland with 50,140. Victoria historically has been the dominate state for international study due to the quality institutions and the high proportion of investment into residential real estate by foreign investors.
Ten years ago there was little in the way of purpose built student housing with the exception of on campus facilities, in the last five years however there has been a strong push into this sector with many international developers and managers growing this market. Within the Inner Sydney market there are just over 6,000 beds in purpose built facilities mostly catering for the University of Technology, University of Sydney and University of NSW.
International enrolments in these three universities alone during 2013 totalled 49,809. With only 6,000 beds available in the region there is a mismatch in demand and supply of student accommodation. This type of housing is not restricted to international students; local domestic students which account for three and a half times the international student numbers may also require local accommodation. There has been a great push in new development for this type of housing with a number of new developments such as the Central Park property, Iglu facility at Pyrmont and various Urbanest facilities within the Inner suburbs.
Looking forward the supply pipeline is strong within another 5,800 beds anticipated to enter the market over the next five to seven years, the largest being the Entertainment Centre precinct as part of the broader Darling Harbour redevelopment program which will add 1,000 beds to the inner city.
Income levels for these types of assets are high which are making them sought after by savvy managers and owners, studio apartments can rent in the region of between $460 to $520/week or slightly less for multi room apartments with shared living facilities. With occupancy levels at 100% across these facilities returns for large facilities can be quite attractive, over the past two years only a few sales have been recorded for these purpose built facilities attracting yields in the 7.0%–7.5% range.