Capital Flow to Student Accommodation Sector Surges

Investment in the student accommodation sector continues to rise as increased student numbers and undersupply drive interest. 

Knight Frank’s Australia PBSA Update Q2 2025 said that the purpose-built student accommodation sector (PBSA) had gained investment popularity across the year to date.

Four deals brokered this year have added $1.8 billion to the sector, compared with $116 million in 2024. 

One of this year’s deals was Greystar’s $1.6-billion acquisition of the GIC-Wee Hur joint-venture portfolio of 5662 beds across seven projects.

But even without the Greystar acquisition, this year’s investment volumes are above the 2024 figure.

“This year we have seen a resurgence in investor interest in the sector, with investors viewing it favourably due to its strong fundamentals, including the undersupply dynamics, student growth and counter-cyclical features, with the prospect of good risk-adjusted returns,” Knight Frank alternatives head Tim Holtsbaum said.

“We expect additional anticipated rate cuts and the prospect of greater political certainty in Australia in the second half of 2025 will lead to greater activity as the year progresses.

“Last year the lack of clarity around international student caps, coupled with a challenging macroeconomic backdrop resulted in a slowdown in the volume of transactional activity.

“Operational schemes remained tightly held in 2024, however, and owners that did bring assets to the market were rewarded with competitive bidding due to a lack of opportunities for buyers, which helped to maintain robust pricing levels.”

Election results may be a factor in how the sector fares during the rest of 2025 with promises to cut student migration numbers among pledges from parties, including the Coalition. 

Holtsbaum said the lack of existing assets would drive innovation.

“Given the limited opportunity to acquire standing investments, we expect to see investors exploring alternative transaction structures in order to deploy capital,” Holtsbaum said.

▲ A PBSA asset at Redfern that Greystar acquired as part of the $1.6-billion deal.

Knight Frank chief economist Ben Burston said high student numbers were driving investor confidence.

“Sentiment among policymakers and stakeholders for the growth of PBSA is strengthening, as it is increasingly recognised for its role in supporting the growing student population while mitigating pressure on rental demand,” Burston said.

“Against this backdrop, investor confidence remains strong due to buoyant student demand, with international student enrolments well above pre-pandemic levels and near double the levels of a decade ago.

“This will aid strong occupancy levels this year.”

The research shows that since 2018, the asset class in Sydney has had an average rental growth of 50 per cent, Melbourne 38 per cent, Adelaide 36 per cent and Brisbane 28 per cent for studio units in student accommodation projects. 

There are 8912 beds under construction and 2772 beds are due to be completed this year, a 40 per cent increase on 2024’s numbers. 

Another 5832 beds are expected to be completed next year.