Student Accommodation Crisis Tipped to Deepen

The Property Council of Australia is warning of an imminent shortage of purpose-built student accommodation as the sector prepares to deal with the anticipated influx of thousands more Chinese students, just weeks before the start of the university year.

In a surprise edict by Chinese education officials in Beijing at the weekend, students were told they must return to on-campus, face-to-face learning if their foreign education credentials were to be recognised back in China.

The Chinese decision means thousands of students are expected to apply for visas to return to Australia for the start of semesters next month at a time when accommodation in all forms is in critical short supply.

A report released late last year by the Student Accommodation Council—an arm of the property council—revealed many Australian cities were already at capacity for student accommodation beds, with Brisbane, Perth and Adelaide expecting zero vacancy rates in 2023.

The council’s executive director Torie Brown said with students scrambling to return earlier than expected, student accommodation would be full in many markets.

“That will put pressure on already tight rental markets as students look elsewhere for places to live,” Brown said.

Federal education minister Jason Clare welcomed Beijing’s decision, saying international education was very important to Australia. In fact, after the extraction industry—coal, gas and iron ore— international education is Australia’s biggest export earner, worth an estimated $40 billion before the global pandemic.

▲ The Chinese decision means more stress for Australia’s already strained student accommodation sector.

Scape, the country’s biggest student accommodation owner and operator, counts 16,000 beds in three states, plus another 9000 under construction but that is unlikely to cover the shortfall.

“Our capacity varies depending upon the state,” Scape’s chief executive Anouk Darling told The Urban Developer.

“Our greatest capacity is in Melbourne and hopefully this news will support the return of students to Melbourne so it can start to reflect the demand-profile in the other states.” .

Those other cities in which Scape operates—Sydney and Brisbane—are nearing capacity.  While Melbourne’s 6500 rooms are 70 per cent booked for the first semester, Sydney’s 5000 rooms are at 90 per cent capacity and Brisbane’s 4000 rooms about 95 per cent.

Darling, who is also chairperson of the student accommodation council, said Perth’s accommodation was now full.

“Scape does not have anything in Perth but my colleagues in the industry who do have assets in Perth say they are full,” she said. “But don’t forget there is a very limited supply of purpose-built student accommodation there.”

Chinese students make up just over half of Scape’s total tenancies, with domestic students the next biggest demographic.

▲ Chinese students are rushing to secure visas for Australia to complete their studies.

The sector has been warning for some time of the need for a big increase in the number of beds available for international students.

In July last year global PBSA provider Yugo pointed to research by real estate consultants showing Australia needed 300,000 to 330,000 beds to deal with the expected demand. There are currently about 80,000 beds across more than 200 assets, most of them in Melbourne, Sydney and Brisbane.

Yugo’s managing director in Australia Tim Klitscher said at the time there were real opportunities for investors  to get into the country’s burgeoning PBSA sector.

But Darling said successive governments had failed to understand the asset class and she called for better support.

“Our biggest challenge is attracting capital,” she said, “we want to be able to expand with this growth in demand but that’s difficult because each state has different assumptions around taxes, around planning approvals. 

“We need a national view and a body that actually understands the asset class and how it is supporting Australia’s largest services export.” 

The federal government considers PBSA an alternative housing asset class, and because of that the sector struggles to attract domestic investment, such as superannuation funds and investment trusts.

“We want to ensure there’s a pipeline to support the industry and the growth profile,” Darling said. “And to do that we have to attract capital, and to do that we need to have a government that is supportive in helping to make that capital flow.”