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How property investors are capitalising on a new supply boom

University campus

With the residential property markets in freefall, investors and property developers have turned their attention to the increasing number of international students going to Australian universities.

With this, there has been a supply boom in the purpose-built student accommodation (PBSA) sector in recent years, with more commercial PBSA operators establishing their presence in major university cities.

CBRE research manager Joyce Tiong said institutional investors were tapping into strong student numbers and a slowdown in the residential market, leading to a greater supply of beds.

“The current low yields in the traditional commercial real estate sectors, along with the residential market moving firmly into a period of correction, has increasingly led institutional investors to look at allocating capital elsewhere,” Ms Tiong said.

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Rosie Young, director of CBRE Hotels/Student Accommodation, commented: “Despite the Australian PBSA sector not being as mature or transparent as the more traditional sectors, stronger demand from major institutional investors is expected as they seek out alternative investments which will continue to support the growing PBSA sector.”

How large will the sector get?

Given Australia’s ranking as a preferred study destination for international students and the rapid growth of 4 per cent a year in the sector, investors are flocking to the market.

“Increased investor preference for student accommodation is set to be tested with the upcoming sales of Urbanest’s $2-billion portfolio and Atira’s $700-million portfolio,” said Ms Tiong.

“Taking into consideration the circa 17,000 beds currently under construction or with development approval, we expect the number of beds, both on and off campus, to grow from circa 65,000 to over 80,000 beds in the next five years – an increase of approximately 25 per cent,” said Ms Tiong.

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How property investors are capitalising on a new supply boom
University campus
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