Real estate agency Savills’ latest Australian Student Accommodation 2023 Report has revealed that demand for purpose-built student accommodation (PBSA) has reached its peak and continues to increase.
However, a supply and demand imbalance is still rife amid low vacancy and a mounting number of offshore student arrivals. The report highlighted an easing pipeline of PBSA development forecast to be delivered over the next three years, with the total number of new student beds dropping by over 50% compared to the last three years.
It also revealed that investors are shifting their focus away from the inner-city suburbs of Sydney and Melbourne and toward places such as Sydney’s northern suburb of Macquarie Park.
“We anticipate that investors will continue to back student accommodation due to the capacity for rents to keep pace with inflation. An all-too-familiar imbalance of demand over supply is continuing to fuel strong annual rental growth in student accommodation over the short term, which we anticipate could, in some markets, still be double-digit in 2025.”Paul Savitz, Director of Operational Capital Markets, Savills
The report from Savills found that despite the slow delivery of new stock, construction costs and the price of debt continue to hinder new developments. PBSA remains extremely attractive to investors due to its counter-cyclical benefits and strong returns, as evidenced by Blackstone purchasing the Student One portfolio.
The Savills Australian Student Accommodation 2023 Report forecasts that PBSA rental growth in Sydney is expected to outperform other cities over the next five years, benefitting from highly ranked universities – such as the University of Sydney and UNSW – an influx of lifestyle students, and a historic undersupply of accommodation.
Rents in Brisbane have increased the most over the past two years, rising by 50%, according to the Savills report. Rents are likely to slow over the next five years, as new supply enters the market from 2026 and affordability ceilings are reached, although this is still significantly above historic rental trends.