THE PROPERTY DEVELOPMENT REVIEW
for international students, and the shortage of housing across the country, the need to continue to develop student accommodation options has now expanded. With most capital cities recording residential vacancy rates in the sub 1.5 per cent range, and rentals increasing as much as 30 per cent per annum in some markets, the mismatch in demand and supply across the broader residential market has been added to by this rapid influx of students. Encouragingly, over the last 12 months we have seen more than 3,500 purpose built student accommodation units completed (dominated by Sydney and Melbourne), many of which were fully subscribed to prior to completion, further emphasising the underlying demand. While 2023 has seen limited new starts, there are close to 2,500 units currently under construction likely to be added to supply over the next 18 months. While we have seen some improvement in development activity, the limited movement in this space during the pandemic has seen the need for some “catch up”, not dissimilar to the broader residential market grappling with population increases fuelled by immigration. However, a combination of labour shortages and high material costs continues to strain the building industry, coupled with lengthy planning delays all adding to the untimeliness of supply projects. Across the investment front, student accommodation and its relationship with residential demand and strong increases in income has not gone unnoticed. An asset class long favoured by offshore buyers, these groups have historically purchased larger portfolios across the country. However, limited assets to market have seen no major transactions occur more recently. The growth of assets such as boarding houses as an investment option have increased in popularity in line with significant rises in residential rents and the demand for smaller and more affordable housing options from a range of tenants.
September / October 2023 – 19
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